The Inter-American Development Bank (IDB) approved a $42.5 million loan to help the State of Tocantins in Brazil modernize its fiscal management by enhancing its tax and spending administration. The loan is part of Brazil Fiscal Management Modernization Program, Profisco II, which supports all 26 Brazilian states and the Federal District.

Tocantins is the nineteenth Brazilian state to receive financing from this program, which will benefit state citizens in general, the state government and the private sector through better service delivery and infrastructure, easier and less costly tax compliance, and greater availability of information and data for public management and public account transparency. 

“Tocantins is a large state with a small urban population and low population density but rapid demographic growth. In this context, this project will allow the local government to increase the state’s income to respond to growing demands for public goods and services by strengthening human and technological capacities for fiscal management and making public spending more efficient and effective,” said André Martínez, an IDB specialist at the Fiscal Management Division. 

The resources for modernizing Tocantins's fiscal management will fund a program with three components. The first is designed to improve management instruments, modernize technological infrastructure, and increase fiscal transparency. Through this component, the program will contribute to strengthening the institutional capacity of the State Finance Secretariat (SEFAZ). The second will simplify tax compliance for taxpayers, streamline tax collection, and expand government revenue to fund programs that serve the population’s needs. Finally, the third component focuses on tightening fiscal discipline and on more effective and efficient government spending.

The Profisco II Program, which includes this financing for the state of Tocantins, operates through a $900 million Conditional Credit Line for Investment Projects (CCLIP) approved in 2017. This line of credit finances projects by individual state governments, with support from the federal government, which provides sovereign guarantees for the program's loans on behalf of the states.

The loan to Tocantins, approved by the IDB Board of Directors, has a 24.5-year repayment term, a six-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR).