OREANDA-NEWS. The Inter-American Development Bank (IDB) has approved a $250 million loan to finance a package of reforms designed to improve the contribution of Uruguay's financial system to the country’s growth. 

The program will assist with improvements in the regulation and supervision of the financial sector, the development of instruments to promote the financial inclusion of homes and businesses, and the strengthening of institutions and regulations for long-term financing. 

“This program recognizes and boosts actions that Uruguay is carrying out in the areas of financial regulation and inclusion. It provides the country with the strategy needed to confront the double challenges of providing stability and credibility to the financial system while at the same time developing policies that allow businesses and homes to benefit from increased access to financial instruments,” said Joan Prats, IDB team leader on the project. 

The program is expected to benefit all economic areas, and its component for financial inclusion will put special emphasis on poor people in order to reduce their vulnerability. At the same time, its component for productive development will put special emphasis on small and medium enterprises (SMEs) and the long-term financing of projects through public-private alliances. 

The program will seek to create a macroeconomic context in line with its objectives, strengthen financial regulations and supervision, reinforce the stability of Uruguay's financial system by improving the work of its regulatory agencies, and improving the transparency in the financial system and the regulations for pension and insurance funds. 

It will also support the development of a definition for a regulatory scheme for financial inclusion as a mechanism for social development and inclusion, of measures to promote universal access to basic financial services and of new instruments and incentives to promote efficiency in payment systems. 

Additionally, it will promote the strengthening of financial institutions and regulations for productive development, with the goal of increasing private investments and improving the efficiency of public investments. To achieve this, it will seek to improve the role of capital markets as an instrument for long-term financing, to strengthen state banks in order to improve their efficiency in using finances to foster development, and to boost public-private alliances to increase long-term financing destined for productive investments. 

Other parts of the program are expected to assist with the improvement of the capabilities by public enterprises to improve their efficiency in investments and management, and the effective implementation of the National System for Public Investment.

The IDB loan for $250 million has an option for deferred withdrawals. It has a 20-year term, with a three-year withdrawal period and an interest rate based on LIBOR.