Contacts:
Stevan Jackson + 1 (202) 458-5054
sjackson@worldbank.org Maria Teresa Norori (505)-270-0000 ext. 436 mnorori@worldbank.org WASHINGTON, DC, November 8, 2006 – The World Bank’s Board of Directors approved on Tuesday a $25 million International Development Association (IDA) zero-interest credit to Nicaragua to strengthen the overall economy by boosting the macroeconomic stability that the Government has achieved and continue its progress in areas likely to have significant impact on economic growth and poverty reduction. The Second Poverty Reduction Support Credit (PRSC II) will provide budgetary financing within a medium term macroeconomic framework. “Over the last twenty years, Nicaragua has managed to make substantial progress in development despite confronting volatile natural disasters and external shocks,” said Jane Armitage, World Bank Director for Central America. The PRSC II is the third operation in a series of programmatic credits in support of Nicaragua’s Poverty Reduction Strategy and the second in the PRSC series. PRSC II will provide needed resources to finance general government expenditures. This operation will also contribute to donor coordination through its close links with other external financing agencies in the Budget Support Group (BSG). The five strategic areas of PRSP II that credit will support are: i. economic growth for poverty reduction; ii. human capital development and social protection; iii. productive and social public infrastructure; iv. governance and state reforms; and v. macroeconomic stability. The PRSP II, also known as the National Development Plan 2005-2009, emerged from a broad participatory process at the local level with departmental development councils and sector consultations. “The PRSP incorporates views voiced in the consultations, such as increasing infrastructure investment, emphasizing participation and decentralization in the PRSP’s implementation, increasing transparency in program monitoring and evaluation,” said Joseph Owen, World Bank Country Manager for Nicaragua. “The new financing also seeks to improve the alignment of donor contributions with the PRSP II goals.” The economy has continued to perform well, notwithstanding the adverse pressure from higher oil prices. Growth accelerated to 5.1 percent in 2004 and 4 percent in 2005. “This is an optimal time for the Government of Nicaragua to heavily invest in policies and programs that foster greater macroeconomic stability and poverty reduction,” explains Amparo Ballivián, World Bank Lead Economist and Task Team Leader for the project. “We hope that the new wave of funding will help Nicaragua to reduce poverty over the medium- and long-term, and that the benefits of these measures will be felt by Nicaraguans at all levels.” In March 2006 the Bank completed the financing the PRSC I program of $65 million in light of Nicaragua’s satisfactory overall performance and progress in the implementation of the reform program. The World Bank’s current portfolio in Nicaragua comprises 14 active projects and one Global Environment Facility (GEF) grant, totaling $378.3 million in net commitments, of which $163.4 million are still to be disbursed. This $25 million Poverty Reduction Support Credit has a reimbursement period of 40 years with a 10-year grace period. - | 
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