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Brazil’s Pernambuco state to consolidate its fiscal balance with IDB support

Loan for $400 million to expand revenue collection, improve efficiency and transparency in public spending, and strengthen public and private investment

The state of Pernambuco in Brazil will use a loan for $400 million from the Inter-American Development Bank (IDB) to consolidate its fiscal balance in a program of reforms designed to expand public and private investment on a sustainable basis and raise revenue.

The IDB financing is being extended as policy-based loan, which will provide flexible support for policy and institutional reforms through rapid disbursement of lending resources.

Measures to improve the efficiency and transparency of public spending are expected to cut in half the time needed to issue environmental permits and expropriation decrees associated with priority investments, and improve mechanisms for public-private partnerships, among other actions. The program will increase public investment funded by the state’s own resources from 29 percent to 35 percent and boost tax revenues from 9.3 percent of its gross domestic product (GDP) in 2012 to 9.5 percent of GDP in 2014.

Pernambuco’s economy ranks as the tenth largest among Brazil’s 27 states, accounting for 2.5 percent of the country's GDP. The Bank’s policy-based loan will establish a regulatory framework through the issuance of regulations, resolutions, and institutional changes need for the adoption of procedures for revenue management, public expenditure, and investment projects

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

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