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Brazil’s Bahia to receive $600 million IDB loan to consolidate fiscal stability

Strengthening fiscal management will allow increased public investment 

Brazil’s state of Bahia will receive a loan for $600 million from the Inter-American Development Bank (IDB) to consolidate the fiscal stability through reforms to strengthen the financial and revenue management, and to better control expenditures. The project should contribute to increased revenues, paving the way for an increase in state investments over the next two years.

The operation a Policy-Based Loan (PBL), which provides flexible support for institutional and policy reforms through fast-disbursing funds. The project, complementary to a first phase, will support reforms in four areas.

The first area is management of public revenue,with the restructuring of the operating model of tax administration and the adoption of a new regulatory framework to encourage voluntary compliance with tax obligations. 

The second refers to financial management and public expenditure control,from the review of accounting and financial processes to the and regulation of use of the system of public costs in all secretariats of the State. 

The third deals with management of public policies and programs,with by setting the standards for the new governance model of the planned investments in the Multiyear Plan (PPA), which guides government investment every four years. 

Finally, the fourth area deals with macroeconomic stability and fiscal sustainability, by providing for greater the expansion of public investment to supporting the State to fulfillmentin fulfilling its the fiscal targets agreed upon with the federal government.

Among other results, revenue is expected to rise from it’s expected an increase in revenue of $14.2 million in 2011 to $18.4 million in 2014. Investment volumes by the State are Regarding the volume of investments made by the state, it is expected to increase from that the $ 1.7 billion recorded in 2011 to reach $2.5 billion in 2012. 

"For the past 15 years, the Bank has supported investment programs to strengthen fiscal management. From 2009, we began to implement programs based on policies, focused on sustainability and the fiscal balance of the States. This combination of policies and investments programs has been valuable to address the impacts of the global economic crisis, as well as to improve the debt profile and the quality of public spending,” said Fatima Cartaxo, the IDB´s project team leader. 

The IDB financing has a 20-year term, a grace period of five and a half years, and an interest rate based on LIBOR.