World Bank Supports Policy and Institutional Reforms for Lao PDR’s Resource-rich Economy

August 10, 2012 /

The World Bank Board of Executive Directors has approved US$20 million in grant financing for the Eighth Poverty Reduction Support Operation (PRSO)—the first operation of the third programmatic series of operations. The grant builds on the strong results of the previous series of operations with total grant disbursements of US$68 million since 2004.

The newly approved financing builds on the Bank’s assistance for the program aimed at supporting policies and institutional reforms that enable the sustainable management of increasing revenues from the natural resources sector to deliver improved public services, which is in line with Government’s priorities outlined in the National Socio-Economic Development Plan.

“This PRSO series arrives at a critical time as Lao PDR’s economy benefits from abundant natural resources, which if managed well, may put the country on a sustainable and inclusive medium-term growth path.” said Genevieve Boyreau, World Bank Team Leader for the program. “With appropriate macroeconomic and governance policies, the country’s natural resource wealth can make a significant contribution towards rapid, sustainable growth and poverty reduction’.

Since 2004, seven annual PRSOs have contributed to the government’s policies to foster economic growth, reduce poverty, and address lagging human development and vulnerabilities through supporting cross-sectoral and institutional reforms. In particular, support for public financial management reform has helped develop strong policy control of budgetary resources and enhanced the transparency and accountability of the public finance system. Similarly, the reforms have improved the environment for investment, trade and doing business.

To ensure impact and results from previously supported reforms, this third PRSO series continues support in some policy areas while aiming to selectively support new areas of reform to meet the country’s development challenges of ensuring inclusive and diversified growth. Specifically, PRSO8 focuses on five policy areas equally critical for the sustainability of Lao PDR’s path, which increasingly relies on natural resources development.

These key policy areas aim to:

Strengthen macroeconomic policy coordination and management that is responsive to developments in the natural resource sectors and consistent with economic growth and stability;

Strengthen public financial management in the natural resource sector for improved budget credibility, orderliness and participation, as well as sector budget allocation and reporting;

Support sustainable revenue management in the natural resource sector, particularly in the mining and hydropower sectors. This will contribute to coordinated and reinforcing regulations that guide the fiscal and revenue management regimes for the sustainable development of the hydropower and mining sectors.

Improve public service delivery through sustainable financing mechanisms for schools and health facilities. This will translate into an increased number of births attended by skilled health personnel and an increased ratio of textbooks per pupil.

Improve the investment and trade climate to attract quality investment, reduce the costs of trade and facilitate diversified growth.

The Poverty Reduction Support Operation is an important part of the Lao PDR Country Partnership Strategy (CPS), endorsed by the World Bank Board in March 2012, which aims to improve public sector management, competitiveness and connectivity, sustainable natural resource management, and inclusive development by supporting policies and institutional reforms.

 

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