Selic level costs millions for the Union, says Ceron – 06/23/2023 – Market

Aligned with statements by members of the economic team, the Secretary of the National Treasury, Rogério Ceron, spoke this Friday (23) about the “symbiotic” relationship between monetary and fiscal policies, mentioning the impact that the basic interest rate (Selic ) has on Brazil’s public debt.

In an interview with Exame, Ceron said that each percentage point of the fee costs tens of millions of reais to public coffers. “If, instead of 13.75%, the Selic were currently 10%, you would have almost one Bolsa Família per year saved in terms of interest on what is being paid on the public debt”, he said.

The secretary made it clear, however, that this does not mean that he thinks the Selic should be at the 10% level.

During the interview, Ceron avoided criticizing the Central Bank’s latest interest rate decision, which kept the basic rate at 13.75%, without signaling future cuts.

“In my role I avoid commenting [as decisões de juros do BC]just as I would not want the monetary authority to comment on fiscal policy, or give hints on how fiscal policy should be conducted.”

Ceron said, however, that the Minister of Finance, Fernando Haddad (PT), and the Minister of Planning and Budget, Simone Tebet (MDB), have legitimacy for this, since they make up the CMN (National Monetary Council), which decides the country’s inflation targets, which is important for defining the interest rate.

But the secretary commented that the fiscal measures adopted by the Ministry of Finance have brought credibility to the market, which can be noticed by the drop in future interest rates.

“From the beginning of the year until now we have had what is called in the market the closing of the yield curve [futuros]. A percentage point was withdrawn, this represents something around R$ 80 billion less in interest per year”, he said. According to Ceron, the Treasury has managed to bring predictability to the market, indicating a more balanced economic future for the country.

FISCAL FRAMEWORK

Ceron also commented on the changes that were made in the House and Senate in the text of the new fiscal framework sent by the Treasury to Congress. According to him, the Legislature improved the matter.

The secretary cited as positive the change made in the Senate in the basis for calculating inflation that corrects the Public Budget, which excludes the need to send tax credits, according to Ceron. But he criticized the exclusion of the Constitutional Fund of the Federal District from the spending limit rules of the fiscal framework.

“There should be a change in the correction rule [FCDF] to be more balanced over time, due to the nature of the fund”, he commented.

Despite this, Ceron praised the result of the text as a whole, and said that the success of the fiscal framework does not depend on the measures that have been adopted by the government to increase revenue.

“Successful in this is a plus in relation to the framework. It does not mean that you will not comply with the framework [se não conseguir aumentar a arrecadação]. But it will allow us to be bolder than the framework itself would allow.”

The secretary called fiscal benefits tax expenses, arguing that these benefits generate losses to the public coffers that can reach R$ 600 billion.

“In Brazil, there has always been talk of reducing public spending. When talking about budgetary reduction of public spending, every specialist looked a lot at government spending on income transfers,” he said. “Little was discussed about tax spending, which is spent like any other, but nobody sees it. And that spending goes to large economic groups, to the country’s economic elite,” he added.

According to the Secretary of the Treasury, most of these tax benefits do not bring an economic return to Brazil and even cause damage to public coffers.

“Instead of us having to make the adjustment on top of the poorest layers, of cutting social benefits, of reducing minimum wage corrections, Bolsa Família, we can also make this adjustment a little in the large groups that use these tax benefits “.

Ceron said that the remedial measures that have already been adopted by the economic team generated an increase in revenue for the country in the order of R$ 100 billion, and stated that more measures in this regard should be announced by the government soon.

Regarding the forecast for Brazil’s fiscal deficit, which at the beginning of the year was R$ 230 billion, Ceron stated that the country should end the year with a deficit of less than R$ 100 billion. The secretary said that new fiscal measures and the country’s economic growth this year will determine how much below R$100 billion the deficit will be.