Minister Fernando Haddad, of Finance, criticized the old fiscal anchor adopted by the government – the spending ceiling – saying that it was built with unsustainable rules over time and that it was replaced by the framework approved last year under President Luiz’s government. Inácio Lula da Silva (PT).
The criticism of the fiscal rule under Michel Temer’s (MDB) mandate was made after a meeting with Senate leaders and President Rodrigo Pacheco (PSD-MG), in which he presented the general lines of the spending cut package and other measures to put government expenditure under the mechanism designed by his team.
“We don’t want what happened with the spending cap to happen to the framework. He was not taken care of. Firstly, it was a rule that really seemed unsustainable over time”, said Haddad.
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The Lula government’s fiscal framework, which was put to the test by the market for having established fiscal balance with a surplus starting this year, but which must have a hole within the margin of tolerance and which led the economic team to implement budget blockades, predicts tighter rules for debt growth. However, the government needed to make heavy tax increases to increase revenue and pay for large expenditures mainly on social programs.
For Haddad, the adjustments made in the first year of the new tax rule are as expected, stating that the framework will “inspire care at all times”.
“Each thing that goes beyond what is planned will have to be dealt with, every expense will have to be dealt with. The parts have to fit into the whole. If any part there is inspiring caution, we will go back to the negotiation table and explain it to people”, he pointed out.
According to him, the work of the Ministry of Finance is “permanent” to analyze and adjust accounts when necessary. “We may have good surprises or not,” he said.
“This is going to be a routine. Dealing with the inspector has to become routine again, [porque] It’s no longer routine,” he added.
The fiscal framework drawn up by the Lula government limits expenditure growth to 70% of the revenue variation in the previous 12 months, with an upper limit and a lower floor for expenditure fluctuation. In times of greater economic growth, it cannot grow more than 2.5% per year above inflation. In times of contraction, this limit will be 0.6%.
The initial targets predicted a surplus of 0.5% of GDP this year and 1% in 2026. However, a deficit of 0.25% is now forecast in 2024 and stability next year.
