Supporting Improved Fiscal Management and Rural Public Services in Hunan Province

New Delhi: The World Bank’s Board of Executive Directors approved a US$200 million loan today to support China’s Hunan Province in delivering more equitable and efficient public services in rural areas.

While China’s growth has helped eliminate extreme poverty, it has been accompanied by widening disparities between coastal and interior provinces and between rural and urban areas. Imbalances in inter-governmental fiscal relations have led to excessive debt accumulation, inequitable service delivery and low spending efficiency, which has been exacerbated by the impact of COVID-19.

“Our support to China is increasingly selective, with a focus on closing remaining institutional gaps and contributing to global public goods. Reforms of China’s subnational finances are important to reduce regional disparities, improve public service delivery in poorer parts of the country and contain the unsustainable accumulation of debt,” said Martin Raiser, World Bank Country Director for China.

The financing would support the Hunan provincial government through measures to strengthen local debt management, and provide results-oriented transfers aimed at reducing disparities in the quality of basic education in rural areas. It would also improve financing for rural road maintenance, including by enhancing the climate resilience of rural roads.

The project will also introduce greater accountability by making budget information more transparent and accessible to citizens These changes are expected to improve public expenditure allocation, increase the level of spending on poor communities and enhance public service delivery for the rural poor.

The project is aligned with the provincial government’s rural revitalization program. The results will be first piloted in eight selected rural counties in Hunan. These counties are relatively poor with a median per capita GDP of only about half of the national average.

“This project will introduce new approaches to managing fiscal risks, results-based transfers, and improved asset management at the subnational level, while also enhancing transparency and accountability in local government budgets,” said Min Zhao, World Bank Senior Economist. “We expect the project to achieve demonstration effects that could be replicated across Hunan and other provinces.”

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