The spending cut package approved by Congress represents only the “first wave” of government fiscal adjustment measures, Finance Minister Fernando Haddad said this Friday (20). At a breakfast with journalists, he stated that the expenditure review will be permanent and that he decided to send the proposals now, towards the end of the year, to reduce uncertainties regarding the fiscal framework.
“This package alone is not enough. We are approaching the last day of the legislative year. Either I would send it now to approve a first wave of adjustments, or I would leave a more robust package for next year, which would generate more uncertainty. It is better to submit to Congress what is pacified between the ministries, the Legislature, the deputies and senators at the base, than to wait to have something [economia de gastos] more robust, more eye-catching”, declared the minister.
In the minister’s opinion, it makes more sense to send to Congress what has matured in internal debates than to wait for a broader package until March. Due to the elections for the presidencies of the Chamber of Deputies and the Senate in February, Congress will only elect the committees in March, which would cause the government to waste even more time than if it had not sent the measures at the end of November.
Haddad, however, admitted that he defended more measures in the package, but that he had to do some convincing within the government, characteristic of the democratic regime. “I fought for more [medidas]. Everyone knows. This is the role of the Treasury, but there is mediation that goes through other ministries and Congress”, he explained.
Constant work
According to Haddad, the review of public spending will be constant from now on. “If it’s up to me, this agenda has had an important start and shouldn’t stop. It should be routine practice for the Executive Branch to do this [rever gastos]. This even applies to local governments. The city hall and the state need to have a spending review routine. This shouldn’t be something extraordinary and surprising. As soon as [o Poder Executivo] identifies that something is out of line with what the Legislator imagined, the expense must be reviewed”, he declared.
Among the examples of expenses that have grown beyond expectations in recent years, the minister cited the Continuous Payment Benefit (BPC), a benefit paid to the elderly and low-income people with disabilities. According to Haddad, the relaxation of rules by previous governments led to benefit expenses rising sharply. In the 12 months ending in October, spending increased by 16%.
“The changes that disorganized the BPC gave rise to loose interpretations, and are now being reviewed in light of what happened in the program in recent years. These are sensitive topics, including from the point of view of public opinion, but they must be addressed”, stated the minister.
Fees
Regarding the impact of rising interest rates on the economy, Haddad ruled out the possibility of the government carrying out any parafiscal stimulus, using resources outside the Budget, such as withdrawals from the Service Time Guarantee Fund (FGTS). For the minister, this type of action is not necessary because the official projections themselves point to growth of more than 2% in the Gross Domestic Product (GDP, the sum of wealth produced in the country) in 2025, even with the economic slowdown.
“I don’t intend to make any parafiscal stimulus policy. It is not in our order of considerations. I believe that this cycle of rising interest rates will have a very quick effect on the economy [segurando a inflação num período curto].
Our growth projection for next year is 2.5%. It is in the Budget and is 1 point [percentual] below this year. The slowdown was already more or less contracted by the government itself”, he explained.
