Brazil to Strengthen Fiscal Management with $278 Million IDB Loan

WASHINGTON – The Inter-American Development Bank (IDB) Board of Executive Directors has approved an investment loan of $278 million for the Ministry of Finance’s Fiscal Management Modernization Program – PROFISCO III MF. This operation represents a decisive step toward Brazil’s fiscal sustainability and the implementation of the new consumption tax reform, considered the most comprehensive transformation of the Brazilian tax system in four decades.

This is the third individual operation under Brazil’s Conditional Credit Line for Investment Projects (CCLIP) for PROFISCO and it marks the first federal-level project under this instrument. Focused on modernizing systems, processes, and fiscal governance within the Ministry of Finance, PROFISCO III – MF positions the country for a new cycle of improved revenue collection efficiency, better public spending, and greater predictability for businesses and citizens.

PROFISCO III MF will strategically support the implementation of the new consumption tax, which will replace several existing taxes with a simpler, more transparent model aligned with international best practices. The project will finance essential actions to operationalize the reform, ensuring that the Ministry of Finance is prepared to manage the new tax system and effectively collaborate with states and municipalities.

The operation will support the Federal Revenue Service of Brazil in adopting digital and smart solutions for taxpayer registration management, tax auditing, increased tax compliance, and improved taxpayer relations. It will also strengthen the capacity of the Administrative Council of Tax Appeals (CARF, in its Portuguese acronym) through improvements in dispute-resolution processes and enhanced transparency. These actions will contribute to a more modern and integrated administrative environment, better equipped to address the demands of a tax system in transition.

The program will also reinforce the Office of the Attorney General of the National Treasury (PGFN, in its Portuguese acronym) in advancing initiatives related to legal certainty and reducing litigation, including: the national governance model for outstanding debt; the National Tax Litigation Monitoring Platform; the legal advisory governance model; and the Transparency and Citizenship model for tax information. These initiatives will improve debt collection, reduce disputes, accelerate conflict resolution, and create a more predictable economic environment.

The project will also promote structural changes in the Ministry of Finance’s internal management, especially through strengthening strategic management and information security capacities, increasing institutional efficiency and integrity.

By simplifying processes, integrating systems, and reducing compliance costs, PROFISCO III will bring direct and indirect benefits to the entire population. For businesses, the modernized tax model will provide greater legal certainty, reduced bureaucracy, and lower operational costs. For consumers, the reform supported by the program will make taxes more transparent and easier to understand.

The $278 million loan approved by the IDB will be submitted to the corresponding Brazilian government authorities for implementation. Once signed, it will have a repayment term of 24.6 years, a 6-year grace period, an interest rate based on SOFR, and a local counterpart contribution of $27.8 million.