First Programmatic Fiscal Sustainability and Growth Resilience Development Policy Loan

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The development objective of the First Programmatic Fiscal Sustainability and Growth Resilience Development Policy Loan (DPL) Program for Colombia is to enhanced fiscal sustainability and strengthened resilience of economic growth. The Government of Colombia has requested a DPL for US$300 million. The DPL is the first of a series of two operations supporting the fiscal management program of the Government of Colombia in the context of increased commodities production (oil and mining), mounting long term social sector liabilities, and rising fiscal risks associated with natural hazards. The request underscores the Government's continued interest in engaging with the World Bank to support its efforts in improving fiscal management. The reform program supported by the loan series seeks to enhance fiscal sustainability and strengthen growth resilience. The program includes a series of measures that can be grouped along three main policy reform areas: (a) improved budget predictability and stability, (b) improved social security liability management, and (c) improved disaster risk financing management. The introduction of a fiscal rule with a stabilization fund seeks to reduce and limit the structural fiscal deficit. A tax reform aims to increase revenue collection and improve the efficiency of the tax system. Both measures will improve budget predictability and stability, which are the cornerstone for sound macroeconomic management of an economy which is increasingly relying on commodities.