Haddad says it depends on Congress approving a zero deficit package

In Morocco, where he is participating in the meeting for the presidency of the G20 (a group formed by the 20 largest global economies) and the IMF’s annual meeting, the Minister of Finance, Fernando Haddad, said that the country can start 2024 with zero deficit and reduce further interest. He states, however, that this depends on Congress approving the package of measures to fill the gap of R$168 billion (US$33 billion) in the planned budget.

“If we manage to approve the fiscal measures that we sent to Congress with the same success that we had in the first half of the year, we will be able to work within the expectations of the fiscal framework,” Haddad told Bloomberg News. “It will work by reducing the deficit year after year.”

The minister has been trying to increase revenue and reduce spending to balance the budget for next year, but has encountered resistance from lawmakers to close the bill, due to Lula’s efforts to increase taxes on the rich to balance spending plans.

The lack of consensus between the two is due to one of the government’s main measures to increase revenue: taxing funds offshore and closed, which affect the so-called “super-rich”.

Closed-end funds generally start with R$10 million investment, whether in financial investments, profits and dividends. And when offshores they are made abroad, in tax havens or in countries that have a more favorable tax situation. Today, these funds are only taxed upon redemption.

But Haddad believes he is making progress in the talks. A vote on the matter is scheduled in the Chamber of Deputies for next week. “The appeal we make to Congress is to reestablish a minimum of budgetary discipline so that we can talk about fiscal targets again,” Haddad told Bloomberg News.

The head of Finance also reinforced that Congress’s decisions will affect interest rates in the country. In an interview with Estadão, the minister said he believes that the pace of interest cuts will be maintained. “At least for some time it will remain, because there is space to maintain it. Our real interest rate is still very high. Whatever calculation you make, it is the first or second highest real interest rate in the world. So, there is this space. And there will be even greater space if we have Congress’ approval for these measures.”

After a year of wrestling with the federal government, the Central Bank cut the basic interest rate in August, from 13.75% to 13.25%. And in September it dropped to 12.75%.

The Finance Minister also said, in a speech at the opening of the G20, that the world is facing a “polycrisis”, referring to successive world events, starting with the covid-19 pandemic, followed by the war in Ukraine and now, the conflict between Hamas and Israel. According to him, the world needs “a new and well-coordinated global economic strategy. We need what we could call ’21st century multilateralism’.”