The new fiscal framework that will replace the golden rule and the spending cap will be sent to Congress in the first half of the year, said this Wednesday (21) the future Minister of Finance, Fernando Haddad. In a press conference after the approval in the second round of the basic text of the Proposed Amendment to the Constitution (PEC) of the Transition, he said that he would listen to opinions and that the new fiscal rules should have credibility in the medium and long term.
“First, I want to talk to several economists and schools to forward something robust”, said Haddad. He defined robustness as rules that make it possible to balance public accounts, which are credible and can be complied with.
The future minister praised the maintenance, in the PEC, of the device that obliges the elected government to send a complementary bill with the new fiscal framework until August. Both in the voting in the first and in the second round, the New Party presented highlights to remove the section of the proposal, but was defeated.
“Thereby [novas regras fiscais por meio de lei complementar], we avoid having to approve a PEC to approve the Budget next year”, declared Haddad. “We can approve a new framework to last 10 or 15 years, as the Fiscal Responsibility Law still lasts today”, he added.
The reduction of the period of validity of the PEC from two to one year, said Haddad, will not be a problem precisely because of the anticipation of sending the fiscal framework to Congress. The future minister did not anticipate details because he said he would be “inelegant” with the economists he intends to talk to.
Neutrality
In Haddad’s assessment, despite removing R$ 145 billion from the federal spending ceiling, the PEC will have a neutral impact on public spending if expenditures are compared with the Gross Domestic Product (GDP, sum of goods and services produced in the country). “The value [da PEC] needed to meet the requirement of fiscal neutrality. Next year’s value will not be less than this year’s,” he said.
According to accounts presented by the Economics group of the Transition Cabinet, when considering the 3% GDP growth in the first two quarters of 2022 and a 1% expansion in the next year, the government could spend an additional BRL 148 billion in 2023 and maintain spending at 18.45% of GDP. Haddad said that the principle of “fiscal neutrality” was built by four of the best Brazilian economists.
The new minister also praised the approval, in the PEC, of the mechanism that allows investments (works and purchase of equipment) of up to R$ 23 billion linked to an eventual excess of collection next year. He pointed out that the proposal of the elected government had the support of 70% of Congress during the process. “This has nothing to do with adventure or irresponsibility,” he declared.
Reconstruction
According to the future minister, the PEC was necessary to rebuild next year’s budget and prevent public services and social programs from being interrupted in 2023. [de PEC] allows the rapporteur [do Orçamento] recompose rubrics of people’s rights”.
Regarding the end of the secret budget, Haddad commented that the decision of the Federal Supreme Court (STF) was a request from the population. “We are back to the previous system, which is transparent,” he declared. The new minister informed that the elected government will incorporate the tax reform in the two PECs on the subject that are being discussed in Congress.
Regarding a possible frustration of revenues next year, Haddad said that the new economic team will re-estimate revenues in the first weeks of January and that the deficit projections in public accounts that have been presented “will not prevail”. If the revenue is lower than expected, the next government may have to increase taxes, but the future minister did not talk about this possibility.
