IMF backs Brazil’s tax reform and “ambitious” green agenda

The International Monetary Fund (IMF) “strongly” supports Brazil’s efforts to improve the country’s fiscal situation while praising the country’s “ambitious agenda” for a sustainable, inclusive, and green economy.

“Improving Brazil’s fiscal framework, broadening the tax base, and eliminating spending rigidities would promote the country’s sustainability and credibility,” the head of an annual mission to Brazil, Ana Corbacho, said in a statement.

Brazil’s Finance Ministry unveiled new budget rules in late March to offset limits on spending growth under the administration of President Luiz Inácio Lula da Silva, who has promised to increase social programs and public investment.

The new rules limit spending growth to 70% of Brazil’s revenue over the previous 12 months.

The government’s proposed fiscal framework also envisions a zero primary deficit in 2024, followed by a primary surplus of 0.5% of GDP in 2025 and 1% in 2026.

IMF staff “recommend a more ambitious fiscal effort, continued beyond 2026, to put debt on a firmly declining path while protecting social and investment spending,” Corbacho added.

Claudio Cajado, a member of the Chamber, presented a revised version of the government’s bill on Monday to ensure that the rules are subject to sanctions in the event of non-compliance by the government.

Corbacho also pointed to “Brazil’s efforts to steer a sustainable, inclusive, and green economy, for example, by cracking down on illegal deforestation and taking advantage of competitive advantages in renewable energy.”

In its first months in office, the Lula government has revived an international financing campaign to combat deforestation.

It has partnered with China to seek funding for green industry and renewable energy.

News Brazil, English news Brazil, Brazilian government, IMF

For the full picture, see our Brazil Tax Reform: Complete Guide.