Financial Daily from THE HINDU group of publications
Wednesday, Apr 03, 2002
Industry & Economy
$ 250-m IBRD credit line to support AP Budget
V. Rishi Kumar
HYDERABAD, April 2
ANDHRA Pradesh is set to receive a $ 250-million credit line from the World Bank, an important bridge facility that is being extended for the first time in the country to support the State Budget.
The loan is co-financed by the Department for International Development (DFID) of the UK, which is simultaneously extending an additional grant of £6.5 million.
The State Finance Minister, Mr Yenamala Ramakrishnudu, during the Budget session of the Assembly announced that the loan would part-support the State annual Budget.
The Andhra Pradesh Economic Reform Programme, which this financial operation supports, has three components which encompasses fiscal reforms aimed at restructuring expenditure to meet development priorities, achieve sustainable fiscal balances and reduce burden on public debt. The State public debt had significantly grown over the last few years.
"The funding is aimed at supporting the Andhra Pradesh Government which has initiated some of the most far-reaching reforms in India in the areas of governance, power sector and expenditure management,'' according to a World Bank official.
The public expenditure management and financial accountability reforms in the State seek to improve budget formulation and budget execution to strengthen effectiveness, credibility and efficiency of the budget management system.
Further, the State Government's reforms aim to improve the delivery of public services and enhance accountability of the Government to the public, including administrative reforms, public enterprises restructuring and enhanced poverty monitoring.
The loan is designed such that the proceeds from these two projects will be passed on by the Union Government to the State as budgetary support to help finance the cost of reforms and high-priority development expenditures.
It may be recalled that the World Bank had also cleared a loan of $ 100 million to the Karnataka Government along with specific interest-free credit line of $ 50 million from the International Development Association.
The present assistance of $ 250 million to the State, which was cleared when the Andhra Pradesh Budget session was on, includes a $ 125-million IBRD loan and a $ 125-million credit from IDA.
While the IBRD loan is payable over a 20-year period with a five-year delay term, the IDA credit line is interest-free and payable over a 35-year period with a delayed payment of 10 years. However, the DFID support is in the form of a grant.
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