Peru ties up $300 million IDB loan as economy shrinks

(Reuters) – Peru has landed a $300 million contingency loan with the Inter-American Development Bank (IDB), according to a notice in the country’s official gazette on Wednesday, as efforts continue to jumpstart the economy amid a technical recession.

The loan enables Peru to obtain financing “in the event of a natural or technological disaster, emergency situation or economic or financial crisis in the country,” the South American nation said.

The financing can come in the form of credit lines, bonds or debt operations, according to the notice. Once agreed upon, the financing will last three years, and is renewable for an additional three years.

Peru’s economy entered a technical recession in the second quarter of this year, and officials are now looking to reactivate the economy despite months of downplaying the negative growth. 

In August, Peru’s economic activity shrank 0.63% year-on-year, the fourth-consecutive monthly decline on the adverse effects of the El Nino weather phenomenon, lower private investment and social conflicts earlier this year.

Peru’s Congress recently passed a fiscal stimulus to finance higher expenditures in the country, the world’s second-largest copper producer.

(Reporting by Juana Casas; Writing by Kylie Madry; Editing by Marguerita Choy)