Announcement of Colombia to Continue Reform of the Power Sector and Overall Adjustment Program on December 8, 1987

· FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. BANK NEWS RELEASE NO. 88/25 Contact: A.M. Pimenta-Neves (202) 676-1218 COLOMBIA TO CONTINUE REFORM OF THE POWER SECTOR AND OVERALL ADJUSTMENT PROGRAM WASHINGTON, December 8 The World Bank today approved a quick- disbursing $300 million loan to Colombia in support of the continuation of its reform of the electric power sector and overall economic adjustment strategy. The Government program aims at reducing and rendering more efficient public expenditures in the power sector by improving operational practices, cost recovery policies and investment decisions. It will also increase the number of trained technicians not only in planning and management, but in regulatory, environmental and social areas. The program envisions completion of ongoing generating plants as well as transmission and distribution projects. Rural electrification is a high priority among the social objectives of the Government. The power sector is of great relevance to the Government's new medium- term adjustment program for several reasons. The cost and availability of power are crucial for the industrial sector to maintain its competitiveness and thus contribute to Colombia's overall export drive. Improving the quality and timeliness of expenditures in the power sector is also fundamental as the sector absorbs a major share of the resources available for public investment and is responsible for the largest share of the public external debt. Besides being a source of potential foreign exchange earnings (by making other forms of energy available for export or replacing imports), the electric power sector can be an effective instrument for domestic resource mobilization if its pricing policies are appropriate. The power sector program is part of an overall strategy of the Government to consolidate its adjustment progress initiated in 1984 and ensure sustained growth of about 4 percent a year in the medium-term. Colombia reached all the major targets of its 1984-86 adjustment program. NOTE: Money figures are expressed in U.S. dollar equivalents.  - 2 - The new medium-term overall adjustment program seeks to achieve a further opening of the economy through additional import liberalization; gradual shift away from quantitative restrictions and towards tariffs as major instrument of trade protection; rationalization of import policies to improve resource allocation and export competitiveness; more automatic access to import licences; and a more uniform structure of tariffs and export incentives. The total cost of the power sector reform program for the period 1987- 90 is estimated at over $3.2 billion. In addition to the World Bank loan, the sector program is to receive support from multilateral institutions and official agencies as well as from commercial banks. The World Bank loan is for 17 years, including four years of grace, with a variable interest rate, currently 7.76 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.75 percent on the undisbursed balances. - 0 -