World Bank Approves $275M to Boost Pernambuco’s Fiscal Management and Green Growth

The World Bank has approved a significant new financing initiative to the tune of US$275 million to support the State of Pernambuco, Brazil, in addressing critical fiscal challenges and unlocking the potential for environmentally sustainable private sector development. This program aims to lay a resilient foundation for long-term growth, particularly in one of Brazil’s most vulnerable and economically stressed regions.

Pernambuco, home to nearly 9 million people, is located in northeastern Brazil and grapples with stark development hurdles, including widespread poverty, high unemployment, water scarcity, and climate-related risks such as coastal flooding and prolonged droughts in its semi-arid hinterlands. The state’s socioeconomic struggles have been exacerbated by the impacts of climate change and longstanding infrastructure deficits.

In response, the World Bank's financing operation is structured around two strategic pillars:

Pillar 1: Improving Fiscal Management and Public Expenditure Quality

The first pillar targets the enhancement of fiscal responsibility and governance efficiency, aiming to improve Pernambuco’s public service delivery and investment capacity. Measures will include:

• Stronger expenditure control mechanisms to reduce fiscal inefficiencies.

• Streamlined tax compliance systems that simplify processes for taxpayers and increase state revenues.

• Public investment management reforms guided by sustainability criteria to ensure long-term benefits and accountability.

These steps are designed to reinforce financial discipline, improve transparency in budget execution, and enable more strategic public spending, ultimately strengthening the state’s capacity to respond to social needs and invest in future-ready infrastructure.

Pillar 2: Strengthening the Enabling Environment for Green Private Sector Development

The second pillar seeks to foster a more dynamic, environmentally conscious private sector. This includes:

• Modernization of business registration and licensing processes, aimed at reducing red tape and encouraging entrepreneurship.

• Promotion of sustainable business practices through incentives like the Green Seal certification, which recognizes enterprises committed to environmental standards.

• Facilitating renewable energy projects, particularly wind and solar initiatives, to expand the state's clean energy portfolio and create new employment opportunities.

The program will also prioritize climate transition efforts, including targeted interventions to:

• Expand wind and solar power generation capacity.

• Reduce greenhouse gas emissions.

• Enhance waste management systems and implement circular economy practices.

Alignment with Broader Strategies

This financing package directly aligns with Brazil’s Country Partnership Framework (CPF), which promotes inclusive, sustainable, and climate-resilient development. It also reflects Pernambuco’s Strategic Development Plan, reinforcing the state government’s commitment to building a greener, more inclusive economy that meets the needs of its people while protecting natural resources.

Johannes Zutt, the World Bank Country Director for Brazil, underscored the transformative potential of the program:

“By supporting fiscal responsibility and fostering a greener private sector, this operation will help Pernambuco to lay the foundations for sustainable growth, create new economic opportunities, and enhance the resilience of vulnerable communities. Investments in better public management and climate-smart solutions are essential for building a future where prosperity is both inclusive and sustainable.”

This operation is not merely a financial injection—it is a strategic partnership to reshape the trajectory of Pernambuco’s development, combining economic prudence with ecological innovation. By promoting better public management and unlocking private sector potential, the state stands to become a model for green growth across Brazil and beyond.