Cash transfer for sector policy reform

Approximately 75% of the grant will be used to import U.S. commodities; the rest will go to pay debt owed to the United States. Local currency generations will be used for budget support to development ministries. Disbursement will be over a 2-year period and will be conditioned on GOE progress in meeting conditionality in four sectors: financial, fiscal, trade, and privatization. Specific policy measures in the financial sector focus on: (1) strengthening the banking system by requiring higher capital/asset ratios and by permitting a greater role for foreign and private banks; (2) deepening the securities market by providing a sounder legal framework and more equal treatment of debt and security, and by permitting a greater role for foreign and private securities firms; and (3) liberalizing interest rates. Specific fiscal policy reforms will include broadening the general sales tax, adopting the global income tax, and improving the availability of GOE revenue and expenditure. In the trade sector, planned reforms include lowering nontariff trade barriers, reducing GOE control over export and import industries, and reforming customs duties and procedures. Finally, the enterprise sector reform program includes specific measures aimed at the privatization of public enterprises, the reduction of public sector impediments to private sector growth, and the introduction of new business laws. Related project assistance will be provided under project 2630233.