World Bank supports Guatemala’s response to laying the foundations for a sustainable, inclusive recovery

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WASHINGTON, USA – The World Bank board of executive directors approved today a Development Policy Loan (DPL) in the amount of US$500 million to support Guatemala’s efforts to mitigate the impacts of the COVID-19 pandemic on the human capital of poor and vulnerable Guatemalans, lay the foundations for a sustainable recovery, promote public sector transparency, and improve revenue administration.

By the end of 2020, the pandemic will have ended three decades of uninterrupted economic growth in Guatemala, exacerbating long-standing challenges such as high levels of poverty and stunting, low human capital accumulation and substantial gender gaps. While already dealing with the negative impacts of the pandemic, in November the country was also struck by hurricanes Eta and Iota, which caused severe floods and landslides, affecting more than 1.5 million people.

“The joint effort with the World Bank will allow us to continue the strategy of containment of the COVID-19, supporting the most vulnerable populations through effective and transparent social programs. This is the first step to move into a phase of economic and social recovery. Our priority is to continue looking for the best structures for credit operations,” said Álvaro González Ricci, minister of public finance of Guatemala.

Specifically, the DPL will support the government’s ongoing efforts to:

  • Expand safety nets, including extending the wage replacement program for formal workers furloughed in the private sector and scaling up coverage of cash transfers programs from 5 to 10 percent of the households (from 166,000 households in 2019 to 330,000 in 2022);
  • Broaden access to health services for all students enrolled in pre-primary and primary public schools and provide school meals at home while schools are closed, as well as food rations to vulnerable households;
  • Adopt comprehensive screening measures to prevent increases in malnutrition and food insecurity for 50,000 at-risk children; and
  • Provide temporary liquidity through working capital financing to at least 4,500 micro, small and medium enterprises, of which 2,000 women-owned.

The DPL will also support measures in the government’s Economic Recovery Plan to: i) expand the accessibility, efficiency, and safety of digital financial services; ii) enhance foreign trade; iii) increase access to financial instruments, including legal frameworks for leasing and insolvency; and iv) increase competitiveness, market access and sustainability of the livestock sector. Other measures supported will focus on increasing transparency in the management of public resources and a rapid recovery of revenue collection in 2021.

“Guatemala’s response to the crisis has been swift and comprehensive, cushioning the impact on income, nutrition and jobs for large, vulnerable population groups. The World Bank is committed to help Guatemala and its people stay on course towards a long-term development vision and rebuild better for an effective reduction of poverty and sustainable and inclusive growth,” said Marco Scuriatti, World Bank resident representative in Guatemala.

The US$500 million Crisis Response and Recovery in Guatemala Development Policy Loan has a final maturity of 13 years, including a grace period of three years.

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