Brazil should keep supporting the economy without breaching the cap, says IMF
RIO DE JANEIRO, BRAZIL – The International Monetary Fund (IMF) reiterated on Wednesday that Brazil should maintain support for the economy during this critical phase of the covid-19 pandemic, but without disrespecting the spending cap, a fiscal policy that the entity considers important for the country to preserve advances in economic fundamentals achieved in the last 20 years.
The recommendation was made by the director of the IMF’s Fiscal Affairs Department, Vitor Gaspar, at a press conference to present the conclusions of the Fiscal Monitor report, released on Wednesday. In the document, the entity estimated that Brazil’s gross public debt would reach 98.4% of the Gross Domestic Product (GDP) this year.
Asked about the pandemic’s advance in Brazil and the measures the federal government can take to protect the economy from the economic effects caused by covid-19, Gaspar said that the programs implemented in 2020 successfully supported the most vulnerable and economic activity.
Thus, the IMF Director of Fiscal Affairs pointed out that these policies should be maintained and adapted to the country’s conditions for the pandemic duration.
However, it is necessary that Brazil not only supports the economy but also establishes a medium-term fiscal arrangement that is robust and credible to maintain advances achieved in recent years, such as the adoption of inflation targets and the independence of the Central Bank in pursuing policies to prevent excessive price increases, he said.
“Institutions on the fiscal side still have a work in progress. It is essential that Brazil continues to persevere in this direction,” Gaspar said at a press conference. “Right now, one of the important pillars of Brazil’s fiscal structure is the spending cap. It should be considered an anchor to be valued and preserved, even in these demanding circumstances.”
In December, in an annual report on the Brazilian economy, the IMF already recommended that Brazil prepare to provide additional fiscal support if economic conditions prove weaker than expected in 2021. At the same time, it stressed the importance that the country complies with the cap, at the risk of threatening public debt sustainability.
Source: Valor
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