Third Programmatic Fiscal Management & Comp. DPL

closed

This Development Policy Loan (DPL) is the third in a programmatic series of four Fiscal Management and Competitiveness Development Policy Loans (FMCDPL). The FMCDPL series, along with parallel DPL in the areas of social policy and environment, were designed in close partnership with Government of Peru (GoP) and in line with its policy program, as outlined in the Country Partnership Strategy (CPS). The GoP stated a clear vision for: (i) building on recent economic successes to achieve higher growth and better social outcomes; (ii) constructing a better social contract between the government and citizens based on effective social development; and (iii) modernizing state institutions. This FMCDPL programmatic series has been prepared at the request of President Garcia's administration. It has been designed to support Peru's own program. Unlike the previous two loans in the series, this third operation includes policies to deal with short-term issues such the effects of the global crisis, while maintaining momentum in the implementation of reforms that address structural issues and which will have medium-term effects. The operation supports the GoP efforts in the context of a global economic slowdown. The development objective of the loan is to contribute to growth and poverty alleviation by supporting two main policy areas: (a) quality of fiscal management; and (b) competitiveness. Peru entered the global crisis in a solid position and has managed its challenges well. Good macroeconomic fundamentals and appropriate policy responses to the crisis moderate the negative impact of weaker external demand and external shocks. Aware of the downside risks to economic growth as well to poverty and employment, the GoP has implemented counter-cyclical policies to mitigate the impact of the crisis. Nonetheless, the GoP has not lost sight of the medium-term objectives of its reform agenda, and has continued to make progress in improving the effectiveness of fiscal management and supporting the country's competitiveness and integration into the global economy.