SICA: Good Financial Governance in Central America

Context

Even before the COVID-19 pandemic, member states of the Central American Integration System (Sistema de la Integración Centroamericana, SICA) were facing major challenges. The economic impact of the COVID-19 pandemic has further weakened public finance systems in SICA member states and led to a growth in public debt. As a result, the risk of social inequality has increased, which is negatively impacting vulnerable groups, especially women and girls. States are also facing structural challenges, such as high levels of corruption, budgetary inefficiencies and increased vulnerability to natural disasters.

Public finance systems in SICA member states and regional mechanisms to provide fiscal policy support are inadequately geared towards a recovery that is inclusive and environmentally friendly. The economic and social impacts of the COVID-19 pandemic therefore require a response by states that is effective, transparent and fiscally sustainable.

Objective

Crisis resilience in SICA countries, especially against the economic impacts of the COVID-19 pandemic, has been built up.

Approach

Sharing experiences and information between states is key to enabling a joint response to the impacts of the COVID-19 crisis in Central America. The project therefore supports the Central American Council of Finance Ministers and its executive secretariat with the implementation of its reform agenda and cooperation efforts between regions on financial issues. The focus of work is on tax reforms, digitalisation of tax administrations, results-based budgetary reforms, debt management, financial risks and transparency. The project is also implementing an integrated approach to gender equality.

Furthermore, European Union (EU) funds are enabling the project to strengthen German development cooperation on regional transparency and accountability.

Last update: May 2023