Lula government scratches its own credibility by changing fiscal target, says economist

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Internal debate to change the zero fiscal target to a deficit of 0.25 could harm the government’s image and investments in Brazil, assesses Juliana Inhazs. The Lula government has been holding internal debates to change the fiscal target from zero to a deficit of 0.25% of GDP in 2024. Last week, the president said that he would “hardly reach the zero target” next year, as had been promised by the Minister of Finance, Fernando Haddad. The Budget Guidelines Bill prepared by the government itself foresees “zero deficit” next year – that is, for the government to spend exactly what it collects, without creating debt. READ ALSO What Lula said, Haddad’s irritation and more: understand the back and forth of statements about the fiscal target “I don’t believe the target is feasible”, says economist about fiscal balance in 2024 Haddad’s Ministry of Finance still defends a target fiscal zero, and argues that, before officially changing the proposal, it is necessary to check whether the National Congress will approve the measures that made it possible to bring the public deficit to zero next year. For economist Juliana Inhazs, making the target more flexible would undermine the government’s credibility and harm investment in Brazil. The assessment was made in an interview with Natuza Nery on the podcast O Assunto. “The government loses credibility that it has been trying to gain throughout this year,” she says. “We have to remember that President Lula was elected in a fierce dispute. So he no longer has the support he had in his first two terms […] Changing the target now undermines the credibility that the government has been trying to build since the beginning of the year.” Haddad and Lula in Brasília 9/12/2022 Adriano Machado/Reuters Economist says the market would accept a deficit target Listen to the full interview on the podcast The Subject

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