Brazil’s State of Sergipe to strengthen fiscal management with $27.9 million IDB loan

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USA / BRAZIL – The Brazilian state of Sergipe will strengthen its fiscal management to improve fiscal sustainability with a $27.9 million loan from the Inter-American Development Bank (IDB).

The project will finance measures to modernize fiscal and public spending management as well as improve tax administration.

Financing is part of the $900 million PROFISCO II program approved in 2017 to support digital transformation and modernization of fiscal management in Brazil’s states and Federal District. The project supports the IDB’s Vision 2025 strategy, which aims to strengthen good governance and digitalization of institutions to speed up post-pandemic economic recovery and foster sustainable and inclusive growth among the bank’s member countries.

In terms of fiscal management, the project will promote better integration between strategic planning and budget management, as well as the adoption of a results-based system. It will also finance measures to strengthen human resources management and the integration of the procurement and contracting system with the Sergipe State finance department’s budgeting and financing system.

The IDB loan will also help modernize the secretariat’s technological infrastructure and finance initiatives to boost fiscal transparency, including the creation of web-based tools to improve interaction with society and a unified transparency portal.

The project will leverage the use of digital technologies and data analytics to boost tax collection efficiency, increase revenue, and simplify tax compliance. Additionally, it will finance measures to improve the analysis of tax gaps and tax collection potential; strengthen the fiscal benefits oversight system, and create a web platform for taxpayers to consult tax legislation with answers powered by artificial intelligence. The initiative will help implement a risk-based management model and the digitalization of administrative processes in fiscal disputes.

Lastly, the project will support measures to increase the efficiency of spending quality and financial planning and execution, including adopting electronic systems to manage expenses, judicial rulings on tax claims, and accounting, with a special focus on real estate. The loan will also help improve cost and public debt management processes.

The IDB loan has a 25-year repayment term, a 5.5-year grace period, and an interest rate based on LIBOR.

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