Mexico Strengthening Economic Sustainability DPF

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The development objective of the Strengthening Economic Sustainability Development Policy Financing in Mexico is to facilitate economic resilience and support fiscal and environmental sustainability. The first pillar supports the authorities’ program of facilitating economic resilience. The operation supports policies to facilitate credit for working capital and investments to SMEs beyond the short-term. It also supports important policies to continue fostering digital finance, which has been critical in times of social distancing and it is becoming an essential tool for the new normal in the economy. The second pillar supports fiscal and environmental sustainability. The economic recovery represents an opportunity to steer policies to underpin a more fiscally and environmentally sustainable and climate resilient path. Climate vulnerability is a critical driver of increasing poverty, particularly in the states in the south of Mexico. The reforms supported include the establishment of climate change budget allocations tagging, which through enhanced prioritization and accountability can have significant effects on the critical challenge over the medium and long terms. They also include the establishment of a new framework and institutional process to issue Sustainable Development Goal (SDG) Sovereign Bonds, with proceeds linked to sustainable expenditures in support of the fulfillment of the most pressing SDGs.