IDB Approves $2 Billion Credit Line to Strengthen Fiscal Management in Brazil

WASHINGTON – The Inter-American Development Bank (IDB) approved a conditional credit line of $2 billion to support the third phase of the Fiscal Management Modernization Program in Brazil, known as PROFISCO III. This initiative seeks to facilitate and strengthen tax compliance and enhance fiscal sustainability of states and the business environment.

The program financed by the IDB supports the Federal Government, states, and municipalities to modernize their tax management processes and systems, focusing on the implementation of the new value-added tax (VAT), which was approved in the recent tax reform. Additionally, PROFISCO III will promote measures to improve public spending management, including the incorporation of environmental and climate criteria, to reduce inefficiencies and increase the impact of public policies.

The state of Amazonas will be the first to benefit from this new phase of PROFISCO with a US$30 million sovereign guaranteed loan from the IDB. The individual loan and the credit line were approved by the IDB’s Board of Executive Directors.

In the case of Amazonas, the program will support the modernization and digital transformation of the state’s fiscal management bodies to adapt them to the new tax code. The initiative includes updating processes, systems, and institutional capacities, using technologies to improve decision-making, reduce litigation, and simplify bureaucracy.

To reduce waste, the state will also strengthen its budget planning, financial management, and public expenditure execution processes, using automation and artificial intelligence. Moreover, the state will restructure procedures and employ digital tools to reduce tax litigation, which currently hampers revenue collection and distorts economic incentives.

The program will directly benefit fiscal management bodies by providing resources to improve the management of public revenues and expenditures, as well as offering enhanced training tools. Indirectly, it will also benefit taxpayers and the private sector through more efficient services, lower compliance costs, and improvements in the business environment. The general population will also benefit from greater transparency in public accounts and higher-quality public policies enabled by more efficient spending.

The loan to the state of Amazonas will have a repayment term of up to 20 years, with a six-year grace period and an interest rate tied to the Secured Overnight Financing Rate (SOFR).