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World Bank Approves $506 Mln for Colombia

The World Bank’s Executive Board Thursday approved a $506 million loan to support financial sector adjustment and reform in Colombia. The loan is part of a revised World Bank strategy for Colombia that includes intensified lending through to 2001 to help the country promote peace, ease the impact of the recession on the poor, and rebuild after last January’s earthquake. It is also part of a $1.4 billion package announced in September to help bolster Colombia’s economy.

“This financial sector adjustment loan reflects the World Bank’s confidence in Colombia’s wide-ranging reform strategy, which is critical to its effort to overcome the recession,” said Andres Solimano, director of the Bank’s program in Colombia.





	“This financial sector adjustment loan reflects the World Bank’s confidence in Colombia’s wide-ranging reform strategy, which is critical to its effort to overcome the recession,” said Andres Solimano, director of the Bank’s program in Colombia

“This strategy includes support for recovery and healthy long-term development of Colombia’s financial system, to assure efficiency, competitiveness and prudent risk management in the banking sector.”

The loan approved today supports a project to implement recent reforms of financial sector legislation and regulations to strengthen supervision of banks and deposit insurance. It aims to minimize recourse to general budget revenues to support financial sector reform, thereby reducing the impact on other sectors. The loan will also promote timely, fair and efficient resolution of banks facing solvency problems, as well as provide funds for bank restructuring and recapitalization.

In addition, it will increase the capacity of the Superintendency of Banks and FOGAFIN (which is responsible for deposit insurance and bank resolution), and assist them in carrying out special measures to help financial institutions respond to systemic risk and threats of contagion. Finally, the project will assist in promoting bank privatization and, if necessary, liquidation of state-owned and “officialized” banks being managed by the government.

The package complements an agreement reached in September between the government of Colombia and the International Monetary Fund on a $2.7-billion financing program, as well as support from the Inter-American Development Bank, the Corporación Andina de Fomento, and the Fondo Lationamericano de Reservas.

The fixed-spread loan from the International Bank for Reconstruction and Development is denominated in Euros 482.3 million, with 17 years maturity, including a five-year grace period, and an option for automatic rate fixing.

Helpful link: For more on the Bank’s work in Colombia,
click here.