The fiscal package detailed by ministers Fernando Haddadthe Treasury, and Simone Tebetof Planning and Budget, has merits, but it falls short of the expectations of economic agents and does not have the capacity to significantly reduce Brazil’s gross public debt in relation to the Gross Domestic Product (GDP).
This is the assessment of economists interviewed by the report InfoMoney on the morning of this Thursday (28), shortly after the press conference by Haddad, Tebet, Rui Costa (Minister of the Civil House) and technicians from the Ministries of Finance and Planning, in Brasília (DF), .
According to economists consulted by the report, the president’s decision Luiz Inácio Lula da Silva (PT) announcing exemption from Income Tax (IR) for taxpayers who receive up to R$5,000 per month, concomitantly with spending-cutting measures, sent a bad signal to the market, weakening the package itself.
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“It fell well short of expectations. Despite delivering R$70 billion in the next biennium, the composition of the package was frustrating. The government recycled the fine-tooth comb of R$26 billion that had already been announced and was not being delivered, but did not do so formally. There was no ‘fine-toothed’ box in the package. In the table they publish, clearly the fine-tooth comb makes up the Bolsa Família, BPC and biometrics measures. It is part of the announced package, and this goes against market expectations, which expected the package to be additional to the fine-tooth comb”, points out Gabriel Leal de Barros, chief economist at ARX Investimentos.
“Furthermore, other measures do not represent effective savings. The DRU [Desvinculação de Receitas da União] It is not effective economics. It provides budgetary flexibility for the government, but is far from being a major resource saver. It is not possible to consider this a tax gain”, continues the economist.
“Unfortunately, so-called ‘mathmagic’ is back. The effective savings are very small. What goes in the right direction are the salary bonus and the minimum wage. However, the salary bonus will take a decade to actually be what it should be now, in the short term”, observes Barros.
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According to ARX’s chief economist, “the package does not resolve the market’s biggest concern, which is debt dynamics”. “It is a package to try to keep the framework standing, but it is far from making an attempt to contribute to debt stabilization”, he states.
Barros also criticizes – which, according to him, “neutralizes any signal that the government tried to send that it would make any cuts”.
“The timing for this announcement was completely inconvenient, the worst possible. The market already had it in mind that, at some point, the IR exemption would come. Not now, but possibly in February or March of next year. Having sent it now, along with the package, was an attempt by the government to provide good news amidst bad news, in the government’s perception”, points out the economist.
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“For the market, the fact that this went together reveals that Haddad, in fact, lost the debate within the government. And this is an additional concern because it indicates that the minister may be leaving this process weakened. He is not being able to convince the president of the agenda that needs to be adopted”, adds Barros.
Also heard by InfoMoneyBenito Salomão, professor of Macroeconomics at IERI-UFU, specialist in public finance and doctor in economics from PPGE-UFU, has a more optimistic view of the measures announced by the economic team.
“I don’t think it fell short of expectations. A fiscal effort much greater than that, politically, is complicated to undertake. In fiscal policy, political decisions matter and the ideal is not always the viable one to make”, he states.
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“In principle, the plan is good. It places the minimum wage adjustment rule within the limits of the framework. This is a point that tends to improve this dynamic a little”, continues Salomão. “When the government establishes that the minimum wage must fluctuate within the limits of the framework, it is saying that these expenses will be subject to the rules.”
Another point highlighted as positive by the economist is the allocation of 50% of commission amendments to health, with growth below the spending limit for global amendments.
“Parliamentary amendments are also now within the framework, and that is good. There is no point in this fiscal effort coming only from the Executive. The volume of amendments in the last ten years has grown considerably, and it is important for the Legislature to contribute to this”, he states.
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For Salomão, another healthy measure is the change in military retirement, with the establishment of a minimum age and limitations on the transfer of pensions. “The issue of military pensions should have already been addressed in 2019, with the pension reform, and due to political decisions it was not resolved”, he observes.
Despite the positive points, Benito Salomão corroborates the statement that the package “does not stabilize the debt-GDP relationship”. “It will continue to grow. This package was intended to preserve the parameters of the fiscal framework, so that it would not die within the first two years of government”, he says.
Insufficient measures and wrong timing
The chief economist at Banco Inter, Rafaela Vitória, also assesses that “the announced measures are insufficient to eliminate the deficit”. “The estimated cut of just R$30 billion in 2025 and R$70 billion by 2026 is low, considering the growth in spending of more than R$400 billion between 2024 and 2025, and shows the government’s political difficulty in facing the need of a broader review of spending, including social programs that have seen accelerated and pro-cyclical growth in the last two years”, he points out.
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“On the positive side, some measures go in the right direction, although insufficient. The review of the allowance and the limitation of the adjustment of the minimum wage are in the right line, as is the use of amendments to comply with the health spending floor, which should limit the faster growth of these expenses, but with a limited impact due to the announced rules ”, continues Rafaela. “On the other hand, the announcement of the IR exemption brings more uncertainty to the fiscal trajectory in 2026 and indicates that the government should have new fiscal expansion in the next election year.”
According to Maykon Douglas, economist at Highpar, the “timing” for the announcement of the IR exemption was really not “adequate”. “The key measures cited to equalize the impact of increasing the IR exemption range involve an increase in taxation, something that part of Congress did not digest so well in past events. In other words, the government will need alternatives in case of new dehydration”, he states.
“Given the context of market stress and the tight time to resolve other issues, such as the Budget and tax reform, the ‘pro-surplus’ part of this arsenal of measures could be 100% explicit before the government launches an intention into the debate. in the opposite direction. This would avoid further undue speculation. Now, there are more new questions to answer.”
