PROGRAMMATIC FISCAL AND INSTITUTIONAL STRUCTURAL ADJUSTMENT LOAN III

closed

The Third Programmatic Fiscal and Institutional Structural Adjustment Loan Project within the program will focus primarily on the following key policy actions: a) acceleration of the phase-out of tax exemptions for profits of certain firms; b) increased revenues derived from improvements in tax administration of at least 0.3 percent of GDP, between 2003 and 2004, while maintaining DIAN - Direccion de Impuestos y Aduanas Nacionales - administrative costs per peso collected, below 0.96 percent; c) submission of a new budget law to improve the overall budgeting framework, complementing the 2003 Fiscal Responsibility Law; d) further improvements in the royalty transfer system, including restructuring of the National Royalty Fund; e) implementation of the legal defense of the State policy; f) establishment of oversight bodies for both procurement and asset management; g) compliance with the pilot management contracts with ICBF - Institution Colombiano de Binestar Familiar - and SENA - Servicio Nacional de Aprendizaje; and, h) further progress in the monitoring system for the public sector reform process. Nonetheless, risks exist, namely: the uncertain political environment in the midst of a campaign for a presidential re-election; difficulty in controlling aggregate expenditure levels because of failure of key measures to contain them; institutional gaps that may remain after the public downsizing exercise, thus jeopardizing key roles, and responsibilities; external macroeconomic shocks; and, the current armed conflict.