Haddad: New fiscal rule will not be a debt target – 03/10/2023 – Market

The Minister of Finance, Fernando Haddad, stated that the new fiscal rule that will replace the spending ceiling will not be a goal of controlling the public debt.

“It’s not a debt rule, as I don’t believe it would work under local conditions,” Haddad said in an interview with CNN on Friday night (10).

“Debt is a very important variable, which we have to monitor, but the debt target is something that would cause embarrassment. Instead of harmonizing fiscal and monetary policy, we would create confusion around this. If at a temporary moment, the Central Bank to raise interest rates to control inflation and if there was a debt rule, who would play that role?”, he questioned.

“I cannot anticipate the new fiscal rule, I am just giving indications of how it was constructed. The president [Luiz Inácio Lula da Silva] he was very happy in the campaign, with his power of synthesis that gives him an advantageous condition, when he said that he would put the poor in the Budget and the rich in the Income Tax.”

He also claimed to have advanced the announcement of the new fiscal framework from August to March to calm expectations.

“I announced that we had to harmonize fiscal and monetary policy, we have a very high interest rate, with a very high fiscal deficit, and the role of fiscal and monetary authorities is to seek convergence so that companies can finance themselves,” he said. .

In the interview, Haddad also reinforced the importance of the government not running short of money to end hunger and maintain programs that are important to Lula, such as Minha Casa, Minha Vida.

The spending cap, approved during the administration of former President Michel Temer (MDB), is a mechanism that limits public expenditure growth to the inflation recorded in the previous year and has been in effect since 2017.

The finance minister also stated that he has taken steps to reduce the deficit generated by the budget law inherited from the Jair Bolsonaro government by half, and that he will take other measures in the same direction.

“One year is not enough for the investor, the fiscal framework will offer [essa segurança]. The spending ceiling was very controversial and almost unenforceable, but he introduced a spending rule in Brazil, as in dozens of countries. But there was the problem of the series of measures outside the ceiling and the previous government had no commitment to the collection. Today I had to make a deal with the governors [sobre o ICMS]since Bolsonaro opened a hole of BRL 26.9 billion.”

Earlier, the minister had announced the R$ 26.9 billion agreement between the Union and the states, to replace the losses imposed by the cut of the ICMS (Tax on Circulation of Goods and Services) on fuels made by Bolsonaro on the eve of the election.

In the interview, Haddad also commented on Lula’s recent speeches questioning the high level of basic interest rates and the PT’s criticism of the management of BC president Roberto Campos Neto and the institution’s autonomy. The minister said that the Selic reduction was expected to take place at the beginning of this year.

“The reduction in interest rates was scheduled to take place at the beginning of the year, after President Lula took office. When I released the first package of measures in the right direction, we imagined that this would contribute to this decision.”

“How can you make a healthy fiscal policy with an interest rate that drops revenue and weakens the economy? This division between monetary and fiscal policy is a way of thinking about the economy that may not be able to translate the complexity of this mechanism, they are two arms that have to work together.

Haddad also blamed the Bolsonaro government for the slowdown in the economy. “The measures that the previous government took during the election, which were absolutely populist, made the market start charging higher and higher interest rates. It messed up the economy, Bolsonaro’s election cost R$300 billion.”

The minister took the opportunity to minimize the clash he had with the president of the PT, Gleisi Hoffmann, when he resumed the taxation of fuels, at the beginning of the month. The deputy criticized the reinstatement, through a harsh publication on Twitter.

“I defend the PT president’s prerogative to say what she thinks. [a postagem com as críticas feitas por Gleisi], which I found strange, I called her. I was in India, we talked at length, then I called President Lula to find out how his head was. And, in my opinion, the decision that President Lula took was the right one.”