World Bank supports Sergipe's initiative to enhance fiscal sustainability and improve natural resource management

WASHINGTON, DC, August 27, 2024 - The World Bank Board of Directors approved today a US$110 million loan to support the state of Sergipe, in the northeast of Brazil. This new project aims to strengthen fiscal sustainability and improve the management of natural resources. The initiative comes at a crucial time for Sergipe, Brazil's smallest state by geographic area, which has been facing significant development challenges, including one of the lowest GDP per capita among states and a high poverty rate. The project will assist Sergipe in implementing a new fiscal framework designed to limit the growth of current expenditure, reduce public procurement costs, and improve overall fiscal management.

In addition to fiscal reforms, the project addresses Sergipe's pressing environmental concerns. The state, grappling with water scarcity exacerbated by climate change, will focus on improving water resource management and increasing the use of clean energy. By introducing policies to manage water resources efficiently, including raw water fees and encouraging private investment in infrastructure, Sergipe aims to enhance its resilience against droughts. The project also promotes the use of solar energy to reduce reliance on hydropower and addresses solid waste management through increased recycling efforts.

Aligned with Brazil's Country Partnership Framework (CPF), the project supports broader goals of fostering a more productive, inclusive, and environmentally sustainable economy. It reflects the CPF's emphasis on improving fiscal management and natural resource governance, contributing to a greener economy and increased resilience to climate shocks. The initiative is expected to yield significant benefits, including improved water quality, increased access to sanitation, and enhanced environmental conservation.

The World Bank's support underscores its commitment to helping Sergipe navigate its development challenges and achieve sustainable growth. As the state embarks on this ambitious journey, it will be crucial to strengthen its institutions and ensure effective implementation of these critical reforms, paving the way for a more resilient and prosperous future for Sergipe.

"Sergipe has been working on improving fiscal management and sustainability, seeking a partnership with the World Bank to restructure its debt and strengthen natural resource management. This collaboration will allow for reduced interest expenses, extended payment terms, and ensure more resources for investments and public policies, demonstrating a commitment to improving the quality of life for its population and responsible public expenditure management," stated Fábio Mitidieri, Governor of Sergipe.

"The World Bank is proud to support the state of Sergipe in its efforts to enhance fiscal sustainability and improve natural resource management," said Johannes Zutt, World Bank's Country Director for Brazil. "This project represents a significant step toward addressing the state's development challenges and building resilience against climate change. By strengthening fiscal management and advancing environmental policies, Sergipe is setting a strong example of how targeted reforms can drive sustainable growth and improve quality of life for its residents."

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