Development Policy Lending 3 (DPL 3)

The DPL-III supported the Government's socioeconomic reform program to promote sustainable and broad-based growth. This operation aimed at supporting the Government's effort to set in place key policy and institutional reforms that would help develop investor confidence and promote a faster and a stronger economic recovery. The operation built on the achievements of the previous operations in the programmatic series and carried forward the three-pillar agenda. The programmatic DPL series supported reforms under three policy areas: (i) improving the investment climate to sustain growth, (ii) creating fiscal space for growth through strengthened public finances and public sector reforms; and (iii) improving service delivery and social inclusion. Improving the investment climate: the DPL-III supported the enactment of a Law on Joint Stock Companies, breakthrough legislation on corporate governance, which would encourage transparency in corporate practices, encourage FDI, and reinvigorate the securities market. It also supported amendments to the law on banking with respect to tightening the disclosure of ultimate owners of banks which would strengthen transparency in bank ownership, would facilitate improved banking supervision and enable the likely banking consolidation over the next few years. Also this operation supported actions to reduce the quasi fiscal deficit in the energy sector as well as to improve the business environment for new firm growth by reducing the frequency and costs of business inspections. In terms of fiscal policy and public administration, the DPL III supported a new procurement framework, which would signal the commitment of the government to increased efficiency and transparency in public spending. As in prior operations it also supported a tight fiscal deficit for 2008, which was in line with the IMF Stand-By Arrangement. There were also a number of measures supported by the DPL geared to improving tax policy, tax administration as well as budgeting practices. In terms of social areas, this operation supported focused efforts to bring sustainability to the pay-as-you go pension system. This was a first step and would be the basis for improving allocation of resources across social programs as a way to improved targeting.