Second Programmatic Fiscal Mgmt and Competitiveness Development Supplemental Financing

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The Second Programmatic Fiscal Management and Competitiveness Development Policy Loan (DPL) Project for Peru was selected as the deferred drawn down option for this DPL as this option will allow them to better manage risk by introducing an additional instrument in the country's available risk management tools, particularly in the event of a shift in the external circumstances driving Peru's current growth or the occurrence of a natural disaster. The supplement will be provided to address an unanticipated gap in financing that could jeopardize the fiscal management and competitiveness reform program. A new freestanding Bank operation would not be a timely option. In contrast, the supplemental financing option will enable the Bank to deliver program support as a timelier respond to the financial needs of the borrower arising from tightening of credit conditions. The borrower is committed to the program and the implementing agency has demonstrated competence in carrying it out. The Government is implementing it in a satisfactory manner and has both the commitment and the capacity to continue doing so. Strengthening public finances and improving competitiveness is at the forefront of the authorities' policy agenda. The current policy stance is supportive of growth and macroeconomic stability. The policy mix response and strong fundamentals have made the Peruvian economy resilient enough to absorb the impact of the global financial crisis in a relatively orderly manner.