The World Bank Board of Executive Directors approved today a Development Policy Loan (DPL) in the amount of US$250 million to support Guatemala’s efforts to protect and enhance the human capital of the poor and vulnerable, lay the foundations of a sustainable and green recovery, and promote public sector transparency and improve revenue administration.

The US$250 million “Second Crisis Response and Recovery in Guatemala Development Policy Loan” is the second and final loan in a programmatic Development Policy Financing series. The first loan, for US$500 million, was approved by the World Bank’s Board of Executive Directors on December 17, 2020 and approved by the Congress of Guatemala on May 18, 2022.

“The Government of Guatemala is committed to promoting actions to achieve greater sustained economic growth, promote productive investment, and strengthen transparency and efficiency in the management of public expenditure, all with the purpose of increasing economic development and improving the quality of life of the Guatemalan population, particularly the most vulnerable groups. This program will yield savings for the State for an amount of US$ 88.1 million, equivalent to Q.692.0 million, since a substitution of financing source will take place by not issuing Treasury bonds and using the resources of the World Bank loan for the 2023 budget,” said Edwin Martínez, Minister of Public Finance of Guatemala.

This operation extends the Bank’s support for the Government of Guatemala’s policy priorities, including:

· reforms to reverse human capital losses from the COVID-19 pandemic and address exclusion of poor and vulnerable households via strengthening social protection systems, expanding access to health care services, and improving maternal and newborn health for indigenous populations,

· adaptation and mitigation measures to address the threats of climate change, as well as measures to improve access to finance for MSMEs and regional trade facilitation, and

· measures to improve tax revenue administration and to enhance transparency in the use of public resources and public debt management.

Reforms supported under the DPL are expected to contribute to the following results, among other, i) increasing the number of direct recipients of targeted cash transfers from 166,000 families in 2019 to 220,000 in 2024; ii) expanding the geographic coverage of the school feeding program in public schools to increase the number of beneficiaries from 2.56 million in 2019 to 3.01 million students in 2024; iii) institutionalizing culturally sensitive health care services for indigenous populations; iv) reducing clearance time for shipments at the Tecún Umán II border post (from an average of 5 hours in 2020 to 2 hours in 2024); v) the operationalization of a National Climate Change Fund; and vi) increasing Value Added Tax compliance rate to at least 77.5 percent.

“The World Bank is committed to help Guatemala lay the foundations for an inclusive, sustainable, and green recovery and pave the way for effective reduction of poverty, more shared prosperity and abundant economic, productive and development opportunities for all the people in the country,” said Marco Scuriatti, World Bank Resident Representative in Guatemala.

The US$250 million Second Crisis Response and Recovery in Guatemala Development Policy Loan has a final maturity of 17.5 years, including a grace period of 5 years.