Announcement of the World Bank's Loan to Argentina for Provincial Finances Reforms on January 24, 1995

aWorld Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 95/49LAC Contact: Antonio Pimenta-Neves (202) 473-8722 ARGE-"NTINA REFORMS PROVINCIAL FINANCES WASHINGTON, January 24, 1995 - The World Bank today approved a $300 million loan to Argentina to help the central government reform the way the provinces manage their finances. The quick-disbursing World Bank loan will support measures to improve tax administration and b dgetary control in the provinces, reduce the number of redundant public sector employees, ani privatize provincial enterprises and banks. The Bank l will be disbursed in three $100 million tranches, starting before the end of 1995. FAR-REACHING REFORMS At the time the Menem administration took office in July 1989, Argentina was gripped by recession and a mnnthly inflation rate of up to 200 percent. To eliminate the fiscal deficits that were fueling infh tion, the central government began implementing in 1991 a series of far- reaching structural refonns. These reforms have brought to Argentina price stability and economic growth unkiown for several decades. Provincial finances, however, remain poor and threaten to undermine the federal government's macroeFononic accomplishments. They may jeopardize also the delivery of essential public .ervi~c. Provincial governments account for aimst 40 percent of iotal public expenditure and are now responsible for many core public services in education, health and infrastructure. Addressing this issue, therefore, has become one of the national government's priorities. The World Bank loan is for 15 years, including five years of grace, with a variable interest rate, currently 7.09 percent, linked to the cost of the Bank's borrowing. It also carries an annual commitment charge of 0,25 percent on the undisbursed balance. NOTE: Money figur s are expressed in U.S. dollar equivalents. Archives)Records Center, H 81-001 ( 1)