The Inter-American Development Bank (IDB) approved a $104 million loan to bolster the efforts of the municipality of Recife, in northeastern Brazil, to achieve fiscal sustainability through increased tax collection, better budget and financial management, and more efficient spending.
The operation is structured as a policy-based loan, the first ever granted to a Brazilian municipality, reflecting the close collaboration between IDB and the Brazilian government to strengthen subnational fiscal management.
The credit will finance a series of reforms to improve the fiscal sustainability of the municipality, which is home to approximately 1.6 million people and anchors the country’s fourth largest metropolitan area.
To increase tax revenue, the operation will help strengthen tax compliance by establishing a program to monitor large taxpayers and by continually updating the register of business and real estate taxpayers, among other measures.
For more efficient municipal spending, the plan is to create a centralized public procurement unit to handle common purchases, as well as publish guides to how to increase female participation in municipal procurement and ensure the environmental sustainability of the goods and services that are purchased.
The project will also finance measures to better track the expenditures of municipal government officials. Additionally, it will create an annual registry of active and retired civil servants to ensure the quality of social security information.
The operation also aims to improve service to citizens by centralizing and automating public services, as well as making them more transparent.
These measures are expected to raise the proportion of common goods procured through a centralized system from the current 50% to 60% in 2024 and bolster Recife’s creditworthiness.
The loan has a 20-year term, a 5.5-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR).
Maria Cristina Mac Dowell
Project Team Leader