BR State of Goias Sustainable Recovery DPF

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The development objectives of the State of Goias Sustainable Recovery Development Policy Financing in Brazil are to support the State of Goias in: (i) improving fiscal sustainability; and (ii) adopting climate-smart, resilient, and inclusive policies for its agricultural sector. The first pillar of this Development Policy Financing (DPF) supports the fiscal recovery of Goias through the adoption of a spending cap, by consolidating spending on pensions, and the adoption of a medium-term fiscal adjustment plan. Goias is in the process of adopting a strong set of fiscal reforms and is committing to additional targets to ensure a fiscal recovery. An expenditure ceiling rule will help contain recurrent spending growth. A pension reform that increases the minimum retirement age and increases the contribution rate is expected to reduce the pension deficit by almost 20 percent. With these reforms, the DPF will help Goiás in becoming eligible for the federal government’s fiscal adjustment instrument for states (named “Fiscal Recovery Regime” - FRR), building further on the expected results of this DPF. The FRR places Goias under a medium-term fiscal consolidation plan to improve its creditworthiness in the medium-term, increase its access to credit and federal guarantees, and improve the profile of its debt portfolio through additional fiscal consolidation measures. It thus enables this stand-alone DPF to contribute to keeping the State’s public finances on track in the medium-term. The second pillar supports the State of Goias in adopting climate-smart, resilient and inclusive policies for its agricultural sector. It helps steer Goias’ agricultural sector towards climate-smart practices, including the adoption of the State Plan to address climate mitigation and adaptation. It also supports measures that reduce GHG emissions and increase carbon storage in the soil, by aiming at a 10 percent per year increase in the use of non-chemical fertilizers and phytosanitary products. It strengthens the climate focus of the State’s environmental licensing framework by reducing compensation fees for GHG emission-neutral enterprises. Finally, the DPF supports land tenure regularization for smallholders through regulations that are environmentally sound, inclusive, and gender balanced.