First Amazonas Fiscal and Environmental Sustainability Programmatic DPF

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The Fiscal and Environmental Sustainability Development Policy Financing (DPF) for the state of Amazonas supports fiscal discipline, climate-informed decision making, and an integrated approach to forest conservation and development to help the State improve its recovery after COVID19 and protect the Amazon forest. Against the backdrop of the impact of COVID-19 and the recent increase in deforestation in the Amazon, this US200 million dollars DPF (the first in a two-DPF programmatic series) is an entry point for World Bank policy engagement on the medium-term reform agenda of the state of Amazonas to rebuild better after COVID-19, by promoting fiscal sustainability and by supporting the conservation and sustainable management of the state’s forest resources. This operation faces substantial risks that could affect the expected outcomes, especially in the environmental pillar. The vast area of the Amazon forest, the limited institutional capacity of the Amazonas State, the multiplicity of stakeholders involved, and the complexity of land jurisdiction (not all forests in the state’s territory are under the responsibility of the Amazonas State), render difficult the elimination of risks of illegal deforestation or forest fires. The critical nature of reforms supported by this operation, the coordination with international partners, and complementary technical assistance provided both by the bank and partners mitigate some of these risks. Remaining risks should be balanced against the cost of inaction.