Fiscal framework: Left seeks flexibility – 05/10/2023 – Market

A coalition of leftist parties that includes parties such as PT, Psol, Rede and PSB decided to put together proposals that significantly change the new fiscal framework with the aim of unlocking expenses in the coming years. Among the suggestions are removing Bolsa Família from the budget limit to be created by the text and allowing greater growth in expenses.

The proposals would free up considerable public resources over the term of the new fiscal framework. With that, they would compromise the plans of Minister Fernando Haddad (Finance) to seek the elimination of the deficit in 2024 and, consequently, the stabilization of the public debt.

The proposals were debated at a meeting this Wednesday afternoon (10) between representatives of the parties in the Chamber and may still undergo minor modifications. The group’s intention is to present them to the framework rapporteur Claudio Cajado (PP-BA) next Monday (15).

In addition to considering Bolsa Família an exception to the expenditure limit of the new fiscal rule, the parties propose that federal expenditures may increase more strongly in real terms. The suggestion is to authorize an increase of up to 4.5% over the previous year (instead of 2.5%, as foreseen in the proposal sent by the government).

The acronyms also want to increase how much expenses can grow in relation to revenues. Instead of 70% of the collection recorded in the 12 months ending in June of the previous year, the percentage would be 90%.

The group’s parliamentarians also want to widen the tolerance interval to reach the surplus target for the year. Instead of 0.25 percentage point up or down, the text would authorize a 0.5 percentage point band.

According to Deputy Pedro Uczai (PT-SC), there are already conversations with Cajado and he himself presented the idea of ​​raising the numbers to the rapporteur.

“We want to help the government, improve the fiscal framework and improve the conditions for resuming our country’s economic and social growth,” he said.

The president of the PT, Gleisi Hofmann (PT-SP), stated that there is a concern among parties in the allied base of President Luiz Inácio Lula da Silva (PT) with possible changes that may be made in the fiscal framework bill, which she classified it as an “offensive by proposals from the right, [propostas] liberals”, which, according to her, will “resurrect the spending cap”.

“One of the things that is worrying us are the suggestions, proposals from the market and from the most conservative pole of Congress, from the right, for changes in the framework bill. The issue of criminalization, accountability, contingency, removing exceptionalities, put more locks”, he said.

The movement exposes a division within the PT itself, since the leader of the party in the Chamber, Zeca Dirceu (PT-PR), said, also this Wednesday, that the party would not make proposals to amend the framework.

“The PT bench will not make amendments to the fiscal framework”, he said in a WhatsApp message sent to different recipients in the morning.

Cajado has been publicly indicating that the fiscal rule may gain triggers to contain the increase in expenses with civil servants and new tax waivers in case of non-compliance with the primary result target.

In an interview with Sheet, the deputy had already demonstrated his intention to include adjustment triggers in expenses. The absence of a more rigid command of rebalancing measures in the text of the fiscal framework has been a frequent point of criticism from congressmen and financial market agents.

The proposals are criticized by Uczai, who argues that the government is already governed by the Fiscal Responsibility Law, which would make it unnecessary to place triggers and punishments for non-compliance with the framework’s fiscal targets.

“We don’t have to put the government in a straitjacket, we have to help the government to get out of the economic stagnation we are experiencing, with abusive interest rates produced by the Central Bank”, stated the PT.

He also stated that more debates will be held between the block of parties before the proposals are presented to Cajado, but that the horizon of changes will not change.