Report No. PIN22
Colombia CAS: Public Information Notice
World Bank Board Discusses
Colombia Country Assistance Strategy Progress Report
On November 18, 1999, the World Bank's Board of Executive Directors discussed the progress
report on the Bank's Country Assistance Strategy (CAS) for Colombia. This Report provided
an update on Colombia's economic and political situation since the last full Country
Assistance Strategy (CAS) was discussed and endorsed by the Board in 1997.
Country Context:
Since taking office in August 1998, President Andres Pastrana's administration started
to tackle serious challenges, including the launching of a highly ambitious and difficult
peace initiative, a fiscal adjustment and financial restructuring program to restore
economic stability, and the improvement of international relations. So far results have
been mixed, with numerous setbacks in the peace process and complications in macroeconomic
management due to a deeper than anticipated economic recession and deterioration in the
financial sector. The Pastrana Administration has prepared a four-year National
Development Plan that places strong emphasis on:(i) achieving good governance; (ii)
building social capital; (iii) obtaining peace and development; and, (iv) reactivating
macro-economic growth and employment. In order to implement the National Development
Plan, the Government has developed a comprehensive strategy, the Plan Colombia, which
outlines an approach to strengthen the peace process, control drug traffic, and reactivate
the economy. The Plan Colombia will be partially financed through bilateral and
multilateral financing, including the World Bank. The development priorities outlined in
the National Development Plan and the Plan Colombia are fully consistent with the
objectives identified in the 1997 CAS.
Poverty and Inequality: As reported in the 1997 CAS, the incidence of poverty in Colombia
had declined steadily, from an estimated 50 percent in 1964 to 20 percent in the
mid-1990s. However, as a result of the economic crisis, the gains made in the area of
poverty reduction have been eroded over the past two years. At the national level, the
incidence of extreme poverty, which had continued its decline until 1997, to levels of
under 18 percent, rose by over two percentage points to 20 percent in 1998. Moreover
while rising unemployment has affected most Colombians, the poor, and in particular women
and young people, have suffered more. For example, the poorest quintile of the population
has an unemployment level of 25 percent, more than three times higher than that affecting
the top quintile (7 percent). The rate of unemployment among the young between 15-19
years old is now 44.3 percent and among women 23.2 percent. The loss of employment has
placed increased stress on the incomes of the poor, resulting in deferred health care and
higher school dropout rates.
Thus, in order to alleviate the impact of the current economic crisis on the poor, the
Government has identified the segments of the population that have been hit hardest by the
crisis. In response to the problems of these vulnerable groups, the Government is now
designing programs, with the support of the Bank and IDB to provide them with basic social
services. Funding for this social safety net would amount 0.3 percent of GDP (about $300
million) annually over the next three years. At the same time, in order to reduce
structural poverty, as well as to establish the basis for sustainable economic
development, human capital will need to be expanded through continued efforts to improve
systems for the provision of education and health services, with the goal of providing
universal coverage in these areas.
Bank Strategy:



The 1997 CAS, following a participatory process that included open dialogue and
effective consultations with Government leaders and civil society, identified the main
objectives of poverty reduction, social development, and sustainable growth. These
objectives were to be achieved by interventions in six strategic areas: (i) promoting
peace and development; (ii) promoting rural development; (iii) developing human capital;
(iv) attaining public sector responsiveness and efficiency; (v) improving infrastructure
services; and, (vi) ensuring sustainable development. These key priorities have not
changed and will continue to be supported by our lending program. However, due to changes
in the international and domestic environment, we have adjusted our assistance strategy.
Important changes have been partially driven by the international events that took place
in late 1998 and early 1999 (i.e., the crisis in international credit markets and sharp
drops in oil and coffee prices) that could not have been foreseen in the CAS, and the
ensuing deterioration of general economic conditions and the domestic financial sector.
The Colombian Government has responded to these developments by implementing a serious
fiscal adjustment program, and strong reforms in the financial sector. The need to
rebuild confidence in the macroeconomic management and secure external financing has led
the Colombian authorities to request a formal IMF program - the first one since the 1960s.
Lending Program: The proposed lending program for FY98-01 would be about US$1.5 billion.
Non-lending Services: The Bank's role as a knowledge institution has been important in
Colombia. For example, the Bank has supported the developmental dimensions of the peace
process by producing sector work and analysis that will contribute to the country's
efforts to address the problem of violence, including publication of a book that will be
distributed in Colombia.. We are undertaking analytical work to assist the Government in
identifying the groups that suffer the most from the economic crisis, as well as those who
will bear the brunt of fiscal austerity measures. This work will assist the Government in
identifying programs that would help soften the impact of the current crisis on vulnerable
groups and will feed into our planned Social Safety Nets Project and the Social Sectors
Adjustment Loan. In addition, a set of Policy Notes was produced that cover priority
development issues, such as: (i) achieving peace and reducing the overall level of
violence; (ii) restoring high rates of economic growth and reducing unemployment while
maintaining fiscal sustainability; (iii) obtaining good governance and judicial reform;
(iv) implementing decentralization and local participation in the education and health
sectors; (v) developing and reducing poverty in rural areas; and (vi) attracting maximum
private sector investment in the infrastructure and energy sectors.
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