The World Bank and President Manuel Zelaya Rosales work to meet Millennium Development Goals in Honduras through US$4.5M Output Based Aid grant

Tegucigalpa, Honduras – June 19, 2007- The President of Honduras, Manuel Zelaya Rosales formally signed a US$4,500,000 grant agreement today with the World Bank’s Global Partnership on Output Based Aid (GPOBA) to establish a fund for improving water and sanitation services available to poor communities throughout Honduras.  In this latest effort to help meet the World Bank’s Millennium Development Goals, GPOBA will partner with the Honduran Fund for Social Investment (Fondo Hondureno de Inversion Social, or FHIS) to create a framework for contributions from the United Kingdom’s Department for International Development (DFID), The Netherlands Ministry of Development Cooperation (DGIS) and the International Finance Corporation (IFC) - a member of the World Bank Group.  The grant will provide the financial means to develop a Honduran Output Based Aid (OBA) facility that is expected to support projects benefiting approximately 40,000 poor households.

This new, country specific OBA facility will independently identify, rank, and oversee water and sanitation service projects throughout Honduras.  Funds from this facility will be disbursed to projects only once they meet agreed output targets (e.g. new household water or sewerage connections, operating stand pipes etc) and after a given period of service provision.  In tandem with GPOBA’s grant, the government of Honduras through FHIS will contribute an extra US$1M to the new OBA facility. 

Mr. Gustavo Saltiel, the World Bank’s Project Manager, mentioned that “Helping poor communities obtain access to safe drinking water and sanitation is essential to fostering their development.  The connection subsidies that this grant provides will enable Honduras to combat the spread of disease and increase the efficiency as well as the financial viability of critical services.”  The United Nations has declared that access to safe drinking water is a basic human right, yet almost one third of rural areas in Honduras lack a consistent supply of potable water.  According to the Pan American Health Organization, 23% of contagious diseases in Honduras are waterborne which makes this grant particularly important in the effort to eradicate poverty there.

GPOBA is a multi-donor World Bank administered trust fund whose aim to test output-based aid (“OBA”) approaches, selectively scale-up these approaches, and disseminate the lessons learned.  OBA involves targeted performance-based subsidies that are disbursed only after service providers have delivered the outputs which are agreed beforehand.  “The provision of performance based subsidies addresses the affordability constraints faced by poor households in obtaining basic services in Honduras. GPOBA is delighted that the pilot OBA facility will make such services available to poor households in numerous municipalities in Honduras. The advantage of an OBA facility is that it can relatively easy be scaled up, if the pilot proves successful”, stated Patricia Veevers-Carter, Program Manager for GPOBA.

Since its establishment in 2003, The Global Partnership on Output-Based Aid (GPOBA) has worked extensively to facilitate projects where the explicit use of one-time subsidies can overcome financial obstacles that prevent the poor from obtaining basic infrastructure services.  GPOBA funds are given as grants and do not require repayment.  Its donors include, DFID, IFC, DGIS and AusAid.