Senate consultancy says framework has limitations – 05/12/2023 – Market

The Senate Budget Consultancy assessed that the government’s proposed fiscal framework is “a good starting point” for structuring the rules of public accounts, but has limitations that in practice prevent it from working as a fiscal anchor in fact.

It is the most recent legislative study to recommend a tightening of the rules of the fiscal framework, after technical notes from the Chamber’s consultants also raised reservations to central points of the project.

According to the report, released this Friday (12), the proposal “does not establish any substantive result” that is independent of ordinary Budget decisions, “thus losing its character as an anchor to ultimately condition the behavior of political agents” .

For the consultants, the text “does not allow for a minimally conclusive assessment” on the effect of the proposed framework on the fiscal balance and the trajectory of the public debt.

The consultancy also criticized the fact that the government had expanded the list of expenses to be outside the limitations created by the framework and extinguished the forecast of sanctions in case of non-compliance with the goals.

There are also questions about the fact that the project sets a minimum limit for investments, without creating some kind of mechanism to ensure the maintenance of mandatory expenses in times of fiscal restriction.

The consultants also point out that the term “investment” itself is imprecise and can cover a range of expenses with no concrete potential to leverage growth —such as the distribution of tractors to city halls—, without at the same time ensuring costing expenses that may be linked to relevant works —such as expenses with scientific research.

The consultancy’s proposal is for the fiscal framework to relate the spending floor to a list of predetermined specific projects. The text also defends the creation of budgetary reserves to absorb fluctuations in revenue and mandatory expenses and to avoid interruption of priority projects.

The rapporteur for the project for the new fiscal framework, Deputy Cláudio Cajado (PP-BA), will present his opinion next week, probably on Tuesday, his office informed this week. The parliamentarian has been pressured to toughen the rules also by opposition acronyms.

On Thursday, Cajado said that he was still analyzing the deadline for activating the triggers and the accountability of managers who do not meet the goals.