Brazilian government to present new fiscal policy framework in March

Brazilian Economy Minister Fernando Haddad announced yesterday, Wednesday, that the government would present a new fiscal anchor proposal in March to replace the public spending ceiling rule in place since 2017.

“In March, we will announce what we understand will be the appropriate fiscal rule for the country,” Haddad said at an event in São Paulo organized by investment bank BTG Pactual.

The current public spending ceiling, approved in 2016 and implemented in 2017 by a constitutional amendment, prohibits increasing public spending above inflation for two decades as part of a fiscal austerity policy.

Last December, the Brazilian Congress approved another constitutional amendment authorizing the incoming government, headed by president-elect Luiz Inácio Lula da Silva, to increase social spending in 2023.

In exchange, the Executive must submit a new fiscal framework to Congress to replace the public spending ceiling.

Lula and Haddad are critical of imposing a spending ceiling since they consider that it would limit social spending on the neediest sectors.

That is why they have asked for suggestions from technical teams and even the International Monetary Fund.

“For two months, we have been studying fiscal rules from all over the world, documents from international organizations”, assured Haddad, and added that a “demanding but realistic” fiscal target is necessary to face social problems.

He also assured that the government intends to present and approve a tax reform this year in Congress.

President Lula is pushing for an increase in the minimum non-taxable income to reduce the tax burden of those earning the lowest salaries.