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A Blog about Public and Development Economics

El Salvador to Get $250 Million from World Bank

Like many developing countries throughout the world, El Salvador has been quite adversely affected by the global financial crisis. It is estimated that its GDP will contract by 1-1.5% in 2009, in stark contrast to the 4.8% growth that it enjoyed as recently as 2007. To make matters worse, El Salvador will be receiving far less external funding, which has been principally comprised of remittances from developed countries like the United States.

The World Bank has committed to a substantial $250 million loan to El Salvador to help mitigate the economic fallout from the contraction by funding public programs and social programs and to fuel job creation in the ailing country. From the World Bank’s press release:

Regional World Bank vice president Pamela Cox explained that these funds will focus on social protection, education, health care, job creation and the public sector, among other areas.

Cox emphasized the Bank’s commitment to supporting government plans “to promote inclusive development with opportunities for all, especially now that the global economy is facing a crisis.”

In fact, a large part of this amount —about $100 million— will be earmarked to support social expenditures, one of the most vulnerable areas in light of the global crisis. Part of the money will also be allocated to job creation, said Cox.

Newly elected president of El Salvador, Mauricio Funes, remarked “These loans are essential for us, without them we would not be able to implement the job creation programs we need to face the financial crisis.”

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Filed under: Development Economics, Fiscal Policy

As California’s Finances Go, So Do Programs for the Less Fortunate

The Economist has a good summary of California’s financial distress and what it means in real terms. In essence, Californians have been voting their way to more and more spending funded by greater borrowing. Triggered by the recession, that debt has become unmanageable, and California has started losing its good credit rating. At the same time, California is reluctant to increase taxes to help ease the shortfall. That leaves viable only one option to mitigate the fiscal mess—cutting back social programs. The article reads:

The largest part of the budget, and thus the biggest target for cuts, is education. Mr Schwarzenegger has proposed suspending a spending formula that voters explicitly chose at the ballot box. In response, the powerful teachers’ union sent a gesture, in the form of 10,000 protesting postcards, to one of Mr Schwarzenegger’s branch offices. But teachers and schools will suffer, which hurts children and thus parents.

The next largest part of the budget is the state’s social safety net, including its health-care programme for the poor. Mr Schwarzenegger wanted to eliminate entire programmes wholesale, but now appears ready to settle for shrinking them. The debate, such as it is, is now about how many children will lose coverage, how many elderly Alzheimer’s patients will stop receiving visits from nurses, whether to treat drug addicts and so forth.

The pain thus seems likely to flow to the bottom of the social hierarchy. But all Californians will notice. Their parks may close, their neighbourhoods may become less safe.

Filed under: Fiscal Policy, Health Care, Public Economics

Hello world!

This is the maiden post on Econ for Progress. I hope you enjoy reading about public and development economics and join the discourse. I welcome any suggestions on improving this blog and its content. –Sergio

Filed under: Academic Papers, Development Economics, Environment, Fiscal Policy, Health Care, Labor Economics, Monetary Policy, Public Economics, Uncategorized