Senate opposition report says new fiscal framework is unfeasible

A report presented by the leaders of the minority and opposition groups in the Senate states that the proposal for a new fiscal framework by the federal government is limited and is “disconnected from the constitutional command to establish a regime that guarantees the macroeconomic sustainability of the country”.

With the new rule, the text of which has not yet been finalized, the government wants to limit annual expenditure growth to 70% of the increase in revenue for the 12 months ended in June of the previous year – the remaining 30% would be used to reduce the public debt or box composition.

The document highlights that “only central ideas” of the new rule were presented by the Ministry of Finance, still without the final text of the project. According to the analysis, the proposal runs the risk of imposing measures to increase revenues on the government, “without considering political legal limits and economic activity itself”, in addition to not addressing the quality of public spending, including mandatory expenses and investments.

For the technicians responsible for the analysis, the proposal needed to include incentives for the search, by the National Congress and the federal government, for convergence in terms of reducing overlapping, poorly designed or ineffective expenses, for example. The authors also question the abandonment of the administrative reform agenda by the current Executive management.

“As already announced, it is known that the government has given up discussing the administrative reform that, in the long term, could guide better service to the citizen, simplify the number of careers, as well as provide for initial remuneration (for new servers) more adhering to the professional experience.”

The possibility of increasing the tax burden to achieve the government’s primary income targets is also mentioned. “Given that the options formalized by the current government fail to demonstrate the intended fiscal balance, the natural concern arising from such a strategy is how much of this will be equated by an increase in inflation”, adds the text.

As announced by the Minister of Finance, Fernando Haddad, the target established by the economic team is a neutral primary result for next year, after which a primary surplus of 0.5% of the Gross Domestic Product (GDP) in 2025 and 1% of GDP in 2026.

“The primary result seems to be far from the band floor set by the government, suggesting rule inconsistency. The simulations, by independent experts, found that the most promising primary results are obtained only in the scenario where revenue grows the most, suggesting once again that the strategy will be to seek revenue increases”, states the report from the benches.

“With the little that has been disclosed, we know that the plan is unfeasible”, says the leader of the opposition in the Senate, Rogério Marinho (PL-RN).

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