World Bank approves $ 200 million loan to support reforms

Shimla: The World Bank has approved a US$200 million loan for Himachal Pradesh, to support fiscal and administrative reforms needed to boost economic growth and inclusive development, while sustaining the environmental heritage of the state, a World Bank communique stated.

Of the $ 200 million loan, $135 million had been provided by the International Bank for Reconstruction and Development (IBRD with a 20 years maturity and a 5-year grace period. Another $ 35 million credit provided by the International Development Association (IDA), a World Bank’s concessionary lending arm and has a 35 years maturity with a 10-year grace period.

“In spite of the challenges of remoteness of hilly areas, Himachal Pradesh is one of the states leading the way in gender equality and access to services,” said Isabel Guerrero, World Bank Country Director for India . “The state today faces new challenges, including to effectively manage the state’s environmental resources, while investing in hydropower in an environmentally sound way. The operation supports this agenda, as well as addressing key fiscal issues and help sustain the state’s natural resource base.”

The First Himachal Pradesh Development Policy Loan and Credit is designed to create fiscal space to support the state’s development vision, and promote environmentally sustainable development. The operation supports fiscal reform including the strengthening of public financial management, and measures to improve the state’s environment management capacity. It aims to enhance growth and employment, especially in the private sector, and improve governance and public administration.

The major constraint facing the hill state, with about 65 percent of its expenditure committed to salaries, pensions, and interest payments, and a debt stock of about 74 percent of Gross State Domestic Product, is the need to enhance fiscal space to finance development, while improving fiscal sustainability. Fiscal reform and measures to strengthen public financial management will improve fiscal sustainability, while increasing fiscal space and efficiency of public expenditures.

Support to environmentally sustainable development will help to manage the state’s precious natural resource base, from which it derives its comparative advantages in sectors like hydropower and tourism. Improvements in governance and administrative effectiveness, combined with growth-enabling reforms, will lead to increased private investment and productive job opportunities, along with expanded access to improved basic services, particularly for the remote areas, the communique mentions.

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