The Minister of Finance, Fernando Haddad, stated this Thursday (18) that the architecture of the fiscal framework must be maintained, but that the parameters of the rule can be adjusted over time, according to the evolution of public accounts and the choices of each government.
“The architecture of the fiscal framework is an architecture that I would maintain. What you can discuss are the parameters of the framework. You can tighten more, tighten less. […] Discussing the parameters in light of fiscal developments is something that, in my opinion, will happen”.
According to the minister, the change may involve reducing the portion of revenue growth that can be converted into spending, currently at 70%, to 60%, or increasing it to 80%, as well as changing the maximum limit for real expansion of expenses, currently at 2.5% per year, to 2% or 3%, without this meaning abandoning the structure of the fiscal rule.
The minister also stated that possible changes can be made by governments with different guidelines, without this meaning abandonment of the rule.
“An elected government, possibly a government more to the right, may decide to tighten the parameters further to make convergence come faster. Another may maintain the current parameters. That’s part of democracy. Now, the architecture of the framework, I see no reason to change. I wouldn’t choose another path”, he stressed.
Haddad also said that this government’s fiscal rule was built based on the analysis of dozens of countries and received support when it was presented, albeit conditionally.
“Several countries were analyzed to create the fiscal framework. When it was released, it received conditional support from everyone. Three years later, it is natural to discuss whether he lives six years, whether he lives longer, but the architecture is very good”, he argued.
Interest and credibility
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According to him, the movement is more associated with a process of unanchoring expectations that occurred last year, amid noise in the public debate.
“I don’t believe that the interest rate reached this level because of the fiscal. I think it was last year’s de-anchoring that was very heavy. The public debate over the Income Tax project was one of the most pernicious things that happened, because the narrative was created that there would be no compensation,” he said.
Haddad stated that, at that time, the interest rate shock was a response to the loss of credibility and there were not many alternatives.
“For some time, people believed that it wasn’t viable and that discouraged everything. When they started to believe that it was viable, things started to return to normal. But at that moment of the interest rate shock, there wasn’t much of an alternative”, he stressed.
The minister also recalled that the current command of economic policy received the basic rate at a high level.
“We received the interest rate at 13.75%. This shows that the problem did not start now. Credibility is a cumulative process,” he said.
