Panama will receive US$250 million from the World Bank to protect human capital and accelerate recovery

WASHINGTON  – The World Bank Board of Directors approved today a US$250 million loan to support the Government of Panama’s program to protect and foster human capital accumulation during the COVID-19 crisis, while strengthening institutions for the provision of a more inclusive and sustainable economic recovery.

The operation is the second in a series of two programmatic Development Policy Financing (DPF) loans, with the first operation approved by the Board in December 2020 for US$300 million.

“In a context where the adverse impacts of the pandemic led to a fiscal deterioration and large spending pressures, this financing complements our efforts to accelerate the recovery and strengthen health, education and social protection services as well as promote transparency, inclusion and climate change adaptation, all of which are strategic priorities for the government,” said Finance Minister Héctor Alexander.

The series is organized around three pillars:

· The first pillar focuses on protecting human capital during the pandemic and strengthening institutions during the recovery, expanding the delivery of health, education, and social protection benefits and services. Policy actions are considered to improve access, continuity, and quality of health care service provision through addition of remote health services (telehealth). It also focuses on modernizing the education system through digital transformation; and support for vulnerable households still affected by the pandemic through the New Panama Solidarity Plan (Nuevo Plan Panamá Solidario). Reforms are also intended to reduce the carbon footprint of the health and education sectors, while improving resilience to shocks such as such as natural disasters and pandemics.

· The second pillar focuses on strengthening institutions for a more transparent and fiscally sustainable economic recovery, including combating illicit financial flows, and enhancing public procurement. This pillar supports actions related to the transparency and efficiency of the mobilization and use of public resources. These actions continue the implementation of key reforms, such as the regulatory framework for the creation of the Registry of Ultimate Beneficial Ownership (Registro Único de Beneficiarios Finales), and a new procurement law.

· The third pillar focuses on strengthening institutions to build forward a more inclusive and environmentally sustainable economic recovery. The COVID-19 crisis widened preexisting social gaps, with vulnerable groups in rural areas and Indigenous populations falling further behind. Supported reforms help address these challenges by, for example, benefiting family farmers, especially women through the creation of the National Fund for Family Farming and increasing Indigenous Peoples’ agency and voice. This pillar also supports reforms on adaptation and mitigation to climate change.

“This project will help steer the economy to build back better through critical policy and institutional reforms to benefit the most vulnerable, including Indigenous Peoples. By supporting a combination of policy measures to address Panama’s pressing needs, this crisis can be transformed into an opportunity to strengthen services and institutions,” said Michel Kerf, World Bank Director for Central America and the Dominican Republic.

The US$250 million loan from the International Bank for Reconstruction and Development (IBRD) has a variable spread for 20 years, including a two-year grace period.