Haddad denies Lula’s “lack of commitment”, but avoids financing zero deficit

The Minister of Finance, Fernando Haddad, stated this Monday (30) that he seeks to maintain the country’s fiscal balance, that there is no “discommitment” on the part of President Luiz Inácio Lula da Silva (PT) with the situation of public accounts and that the president is not “sabotaging the country”. Haddad, however, avoided saying that next year’s fiscal target will be maintained.

On Friday (27), Lula said that the target of zero primary deficit for 2024 “will hardly be met”, then emphasizing that he does not want to cut investments and works. The president even said that a deficit of 0.5% of GDP next year would be equivalent to “nothing”.

This Monday, at a press conference at the ministry’s headquarters, Haddad deviated when asked about whether or not to maintain the zero deficit target in 2024.

“My role is to seek fiscal balance because I believe that Brazil needs to look at public accounts again. I will seek fiscal balance in all fair and necessary ways. My goal is maintained”, he replied.

The “zero deficit”, that is, a balance between government revenues and spending, is foreseen in the fiscal framework, a rule that replaced the spending ceiling. The new framework was proposed by the government itself, through the Treasury, approved by Congress and then sanctioned by Lula at the end of August.

Haddad denied Lula’s lack of commitment to balancing the accounts, attributing the president’s Friday speech to his “social responsibility”.

“There is no lack of commitment on the part of the president, on the contrary, if he were not worried about the fiscal situation, he would not be asking for support from the economic team for guidance from Congress”, stated Haddad.

“They say that the president is sabotaging the country. No, the president is noticing the problems arising from decisions that can be reformed and decisions that cannot be reformed, be remedied,” said the minister.

The minister attributed Lula’s concern to what he called fiscal erosion. In addition to the interest rate, the minister highlighted, 2017 decisions within the Chamber and the Federal Supreme Court (STF) would have contributed to eroding the tax base.

The first, Complementary Law 160, on tax waivers, opened loopholes for ICMS tax incentive subsidies, leading to a R$200 billion shortfall, according to the minister. The other decision, by the STF, removed the ICMS collected by companies from the PIS/Cofins calculation base, which affected the collection of these federal contributions.

“That’s why estimates [de arrecadação] that we had for this year are not being confirmed at the speed we imagined. These fiscal drains are at an exaggerated level due to these 2017 decisions”, said Haddad.

“We will take measures to the government so that the objectives are achieved regardless of these setbacks”, concluded the minister.