Framework: future governments may change parameters by ordinary law, says Haddad

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Today, spending cap is in the Constitution and, therefore, change is more difficult. Minister also said that capitalization of state-owned companies, such as public banks, will be within the spending limit; text should be released this Tuesday. The Minister of Finance, Fernando Haddad, said this Tuesday (18) that future governments may change the parameters of the new fiscal rule by means of an ordinary law. The spending ceiling, which governs public accounts currently, can only be changed by a proposal for an Amendment to the Constitution (PEC), which requires much broader scores to be approved. At the end of last year, Congress approved the Transition PEC, which authorizes the creation of a new fiscal framework based on a complementary law proposal – easier to approve than a PEC, but more difficult than an ordinary law. This proposal for a supplementary law with the new fiscal framework was finalized by the government and should be delivered to Congress this Tuesday afternoon. “Every government has the right to do this”, said the minister about a possible change in the parameters of public revenue and expenditure. Ordinary law requires a simple majority to be approved, that is, the majority of parliamentarians present at the time of voting. If there was a need to change the parameters by means of a complementary law, the so-called “absolute majority” would be required, that is, more than half of the deputies or senators in the legislature. It would therefore need at least 41 of the 81 votes of senators, for example. Parameters of Lula’s management Earlier, the Minister of Planning and Budget, Simone Tebet, said that the parameters for President Lula’s management will be in the complementary law of the fiscal framework. They are: real growth in primary expenditure (above inflation) in a band between 0.6% and 2.5% per year; spending growth limited to 70% of primary revenue growth (taxes and transfers); reduction of this ceiling to 50% of primary revenue growth, if the primary result (that is, the government’s economy) does not reach the targets set for the previous year. “All these parameters are coming from a supplementary law and it has always been like this. There is an output for 2026, which is another one that I cannot say now but it is in the text”, declared Tebet. Understand how the fiscal framework works Capitalization of state-owned financial companies Minister Fernando Haddad also declared that the capitalization of state-owned financial companies, that is, banks with the BNDES or Caixa Econômica Federal, will be carried out, if applicable, within the limits of the new spending ceiling – set in the fiscal framework. “To avoid speculation about the capitalization of state-owned financial institutions, a rumor that was causing noise in the market and we decided to put an end to this noise, putting an explicit rule in the LDO that the capitalization of a financial institution, which is not even in our plans, if a day, it falls within the rule,” he declared. Economic area is ‘reacting well’, says Ana Flor about new fiscal rule

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