Second Programmatic Fiscal Mgmt and Competitiveness Development Policy Loan

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This second phase of the four-phase Fiscal Management and Competitiveness Development Policy Loan (FMCDPL) programmatic series supports Peru's substantial progress in solidifying the country's macroeconomic fundamentals and promoting broad-based growth. The 2006 elections marked a peaceful transfer of power in a context of fiscal discipline, strong economic performance, and growing employment. Under the administration of President Garcia and with favorable external conditions, Peru has continued and in fact accelerated these positive trends with the support of an ambitious program of reforms. Improving the effectiveness of fiscal management to redress social needs and streamlining the business environment to promote investment and growth are at the center of the Government of Peru (GoP) reform agenda. In keeping with the relationship with Peru outlined in the Country Partnership Strategy (CPS) for the FY07-FY11 period, this programmatic series was developed at the request of the new administration and tailored to meet Peru's specific needs. The GoP has a strong vision for how it wishes to move forward, building on recent economic successes to achieve higher growth and better social outcomes; constructing a new contract between the government and citizens based on effective social development; and modernizing state institutions. This FMCDPL, along with a series of Development Policy Loans (DPLs) in the areas of social policy and environmental management included in the CPS, were designed in close partnership with GoP officials and in line with their vision. The development objective of the series of DPLs under this program is to support growth-enhancing reforms and poverty alleviation. The reform agenda supported by this loan focuses on two broad policy areas: (i) efficiency and quality of public expenditure; and (ii) improved competitiveness. In each of these areas, the GoP has begun to implement a series of policy and institutional changes to progressively reform fiscal administration, public spending and the business climate in ways that will have a broad impact on growth and poverty alleviation.