Tebet says new tax rule will please the market – 09/03/2023 – Market

The Minister of Planning and Budget, Simone Tebet (MDB), said this Thursday (9) that the new fiscal rule designed by the Luiz Inácio Lula da Silva (PT) government is responsible, guarantees resources for investments and will please everyone, including the market.

“It is a responsible fiscal framework, concerned with fiscal responsibility, with the primary deficit, with the stabilization of the debt/GDP, but meeting a fair request from the President of the Republic, because that is what Brazilian democracy wants, that we have to have resources to the necessary investments to make Brazil grow again”, he said.

The design of the new fiscal framework was discussed by Tebet with the Minister of Finance, Fernando Haddad (PT), in a meeting at the headquarters of the economic ministry. Also participating in the meeting, on the Planning side, were Executive Secretary Gustavo Guimarães and Paulo Bijos, Federal Budget Secretary.

“On the budgetary and fiscal side, we left very satisfied. Now it’s a matter of putting the numbers on paper”, he said. The next step to get the proposal off the ground will be for Haddad to present the text to Lula. This is expected to happen next week.

Without giving details of the new model, the minister says that the proposal serves “both sides”, as it encompasses both the concern with zeroing out Brazil’s fiscal deficit, estimated at around R$ 230 billion this year, and with stabilizing the debt/ GDP – which reached 73.1% in January, according to Central Bank data – in terms of Lula’s demand for investment resources.

“We cannot neglect the necessary investments for Brazil to grow again”, he emphasized.

The new fiscal framework to be proposed by the government is one of the topics most awaited by economists in the private sector, as it directly interferes with expectations surrounding the trajectory of public accounts over the next few years.

On the last 2nd, Haddad had already declared that the announcement of the new fiscal rule was brought forward to March so that the Bill of Budgetary Guidelines (PLDO) is forwarded to the National Congress already based on the new fiscal rule.

The minister also said that he wants to present the framework model before the next meeting of the Copom (Monetary Policy Committee), scheduled for March 21st and 22nd. The government’s expectation is that the new fiscal rule will make room for the BC to anticipate the start of interest rate cuts – today the basic rate (Selic) is at 13.75% per year.

The LDO project must be sent to Congress by April 15 of each year, and be returned for sanction by July 17 of the same year. Within this schedule, without a new fiscal framework being presented beforehand, the start of the 2024 budget discussion would have to be based on the current rule (and which the Lula government rejects), the spending ceiling.

The spending cap, approved during the management of then-president Michel Temer (MDB), is a mechanism that limits the growth of public expenditure to the inflation registered in the previous year.

In recent years, it has become the main anchor of public accounts, being identified as the tool that helped control government finances. However, the rule has been circumvented several times, especially after the pandemic.