The World Bank Board of Directors today approved two loans totaling US$300 millions to support reforms aimed at improving results in social sectors- mainly social protection, education and health- as well as the quality and efficiency of public spending, while mitigating the impact of the global downturn on Dominican Republic’s public finances.

 “These operations will contribute to the Government’s efforts to reactivate the economy by helping to cover the fiscal gap for this year and by raising public investment, according to what is established in the budget approved by the National Congress,” said Vicente Bengoa, the Dominican Republic Minister of Finance.

The Public Finance and Social Sector and the First Performance and Accountability of Social Sectors Development Policy Loans (DPLs) are part of the World Bank’s 2010-2013 Country Partnership Strategy for the Dominican Republic and will support Government reforms in three main policy areas: quality and efficiency of public spending, fiscal sustainability, and social protection.

 “The projects will help reduce the country’s vulnerability to future shocks by minimizing inefficient subsidies, recovering costs in the energy sector and improving tax and revenue administration,” said Yvonne Tsikata, World Bank Director for the Caribbean. “In addition, these projects will provide poor families better access to education, health and nutrition while enhancing results, transparency and accountability in social spending,” she added.

The First Performance and Accountability of Social Sectors DPL will support the following activities:

 (a) Redesign the conditional cash transfer Solidaridad program to improve its focus on health and education benefiting the poorest citizens.

(b) Improve budget management to support the new Solidaridad program.

(c) Support the gradual introduction of performance-based budget management in social sectors, which will support better decision-making, including managerial flexibility, transparency and accountability.

(d) Upgrade the Financial Management Information System (SIGEF) to provide public access to timely and comprehensive budget information.

The Public Finance and Social Sector DPL will support a set of institutional reforms and specific development outcomes among them:

(a)   Update the Dominican targeting instrument, (Sistema Unico de Beneficiarios, SIUBEN), to improve targeting of social spending benefiting the poorest.

(b)   Adjust electricity subsidies so they are SIUBEN-based and not geography-based.

(c)   Lower fiscal drain from the transfers to cover electricity sector deficit.

(d)   Review tax exemptions and improve tax administration to improve fiscal sustainability.

“These new operations are aimed at supporting a series of reforms very necessary to promote greater competitiveness levels, foster a results-based public administration and protect the poorest citizens during this international crisis,” said Roby Senderowitsch, World Bank Country Manager for the Dominican Republic. “It is urgent for the Dominican Republic to preserve the human capital of the poor, especially through the protection of education and primary health care services and the Solidaridad Program, which already covers about two million people,” he added.

The two loans of US$150 million each will be directly disbursed to the national budget in one single tranche. The loans are fixed-spread, payable in 23 years, including a 12.5-year grace period.