PROGRAM ASSISTANCE PAPER

Grant funds, which will help GON rectify its current balance of payments deficit, will be disbursed to the Central Bank. The resulting local currency will be utilized for two critical rehabilitation efforts. First, the Institute of Foreign and Domestic Trade (INCEI) will establish a grain price stabilization program. INCEI will purchase up to 32,000 metric tons of basic grains, including rice, sorghum, beans, and corn, from small farmers This procurement will satisfy about 1/3 of INCEI"s storage capacity -- the minimum amount required for controlling domestic food prices. The crops will be stored in INCEI"s 100 storage depots and three terminals and will be sold at 23 distribution points in rural and urban areas. Each of INCEI"s damaged storage facilities will be restored so that INCEI will have sufficient means to process basic grains. INCEI will also purchase needed scales, electric motors, temperature sensing devices, belts, screws, passenger vehicles, and trucks. Controlling grain prices will provide over 400,000 small farmers with production criteria necessary to insure steady supply and will stablize consumer prices for an estimated 250,000 urban poor. Second, the Ministry of Housing (MDV) will undertake a program to reconstruct damaged houses of the urban poor. The program will be concentrated in the cities of Managua and Masaya and will benefit an estimated 1,500 people. Self-help methods for repair will be employed, while larger efforts will be undertaken directly by MDV-contracted workers. While no charge will be made to recipients of self-help construction, enlarged or improved construction will be reimbursed at cost and new construction will be paid on the basis of financial ability. MDV will establish a materials supply fund to purchase basic materials such as cement block and sheet roofing, from local factories. MDV will also design three housing models in conformity with the post-earthquake construction code.