81276723-Good Financial Governance for green and inclusive economic recovery in the countries of the Central American Integration System (SICA)

Before the pandemic, the member states of the Central American integration system were characterized by continuous economic growth, but the economic potential was only used to a limited extent to promote sustainable development. In international comparison, the member states had a low tax rate of 14% on average, high public debt (in some countries almost 90% of GDP) and limited fiscal leeway for social spending (5% to 12% of GDP). There are also structural challenges, such as insufficient access for all population groups to social security systems, a high level of corruption (Corruption Perception Index 2019 below 40 points for all member states with the exception of Costa Rica), inefficient budget execution, insufficiently developed infrastructure and a high degree of vulnerability of states to natural disasters; with the crisis resulting from the COVID-19 pandemic, these structural weaknesses and challenges in the region have intensified. The economic and social effects of the Covid pandemic in Central America require an effective, transparent and sustainable fiscal policy response from the SICA states at regional and national level, which ensures sufficient public investments and social spending to overcome the consequences of the pandemic and ensure sustainable funding. To address these challenges, the GIZ project "Good Financial Governance for a green and inclusive economic recovery in the countries of the Central American Integration System (Sistema de la Integración Centroamericana, SICA)" aims at strengthening Good Financial Governance in order to improve crisis resilience in the states of the Central American integration system, especially with regard to the impacts of the Covid pandemic. The GIZ project focuses on strengthening regional cooperation between the SICA member states through the organizational structures of the Council of Finance Ministers of Central America, Panama and the Dominican Republic (COSEFIN), the Executive Secretariat of COSEFIN (SE-COSEFIN) and the respective regional working groups. In order to strengthen the implementation capacities of the member states for the implementation of regional recommendations and approaches, the project supports all member states with advisory services on the national implementation of fiscal reforms and ensures that the results of these are incorporated into the regional exchange. The strategy of the project builds on the effects achieved in the previous project, which developed approaches and recommendations with SE-COSEFIN to strengthen regional cooperation mechanisms and supported the strengthening of the budget and tax systems of COSEFIN member states. The GIZ project is structured alongside the following 4 outputs: Output 1 aims to strengthen the mobilization of own source revenue for sustainable financing of the inclusive, green economic recovery. Output 2 aims to build regional and national government capacities to plan, implement and evaluate spending policies geared towards inclusion, green economic recovery and crisis resilience. Output 3 aims to improve the management of fiscal risks in the region affected by crises and (natural) disasters. Output 4 aims to increase the transparency and accountability of government action in the context of the Covid-19 measures and to fight corruption.