WB to support the State of Goiás fiscal reform and green economic recovery

WASHINGTON – The World Bank Board of Directors approved today a $500 million BR State of Goiás Sustainable Recovery DPF to improve fiscal sustainability, and the adoption of climate-smart, resilient, and inclusive policies for its agricultural sector.

With around 7.2 million inhabitants, Goiás is the most populous state in the Center-West of Brazil. Fiscal distress was already registered prior to the COVID-19 crisis, given rapidly growing personnel spending and high debt service costs. However, the state’s finances were further impacted by the pandemic. Despite some fiscal relief in 2021 related to higher tax collections, structural fiscal challenges persisted, requiring substantive reforms to tame Goiás’ spending growth.

“The government is committed to promote a greener and more inclusive economic recovery. This partnership will be key to help us strengthening fiscal and environmental management frameworks to achieve such goals. It will also make Goiás the first State to be admitted into the federal government’s ‘Fiscal Recovery Regime’, effective in December 2021”, says the Governor of the state of Goiás, Ronaldo Caiado.

An Agriculture based economy, Goiás has been negatively impacted by climate change. Green-house Gases emissions have been increasing since 2009, becoming a challenge both to large and small scale farmers. This partnership proposes a range of activities that will allow the state to shift its agriculture production towards climate-smart practices.

The operation will support the fiscal recovery of Goiás through the adoption of a strong set of fiscal reforms and the implementation of a medium-term fiscal adjustment plan to keep the State’s public finances on track. It will support the implementation of the State Plan to address climate mitigation and adaptation, which includes measures to reduce GHG emissions and increase carbon storage in the soil, by aiming at a 10 percent per year increase in the use of non-chemical fertilizers and phytosanitary product. It will also improve the climate focus of the State’s environmental licensing framework by reducing compensation fees for GHG emission-neutral enterprises. Finally it will support land tenure regularization for smallholders under land tenure regulations that are environmentally conscious and cognizant of women’s land title rights.

“As Goiás is recovering from the covid-19 economic crisis and leveraging the moment to embark in an ambitious reform agenda, this operation supports policy action to lay the foundations for a greener sustainable economic recovery by supporting the adoption of the state plan of climate change mitigation and adaptation, strengthening the resilience of poor and vulnerable households, particularly women”, says World Bank Director for Brazil, Paloma Anós Casero.

Outcomes supported by the program include:

·         Adoption of an expenditure rule that limits growth of the primary expenditures to inflation as a fiscal anchor for the States’ public finances;

·         Promotion of reforms to make the pension system more sustainable, including increasing the minimum retirement age and contribution rates;

·         Implementation of a medium-term fiscal adjustment plan.

·         Adoption of the state plan of climate change mitigation and adaptation

·         Development and implementation of a national program for bio-inputs to enhance climate-smart- agricultural practices;

·         Increase of the climate focus of the state’s environmental licensing systems;

·         Regularization of legal land tenure for vulnerable small-scale farmers, with focus on inclusiveness, environmental sustainability and gender balance.

This one-tranche loan from the International Bank for Reconstruction and Development (IBRD) to the State of Goiás is guaranteed by the Federative Republic of Brazil and has a final maturity of 17 years, with a 03 years grace period.

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