By Marcela Ayres, Lisandra Paraguassu and Bernardo Caram
BRASILIA (Reuters) – Brazil’s new fiscal framework aims at 2024 zero primary deficit), followed by several years of surpluses as President Luiz Inacio Lula da Silva seeks a sustainable trajectory for the country’s public debt, a government source told Reuters on Wednesday .
According to one of the sources, the primary surplus will be equal to 0.5% of 2024 GDP, rising to GDP at 2024 1%. The new framework will integrate targets for key outcomes with spending rules and will have adjustment mechanisms in case of non-compliance.
“This is a range-bound target tied to the spending rule that spending cannot grow more than 70% of revenue,” the source said. said, adding that annual spending increases would be capped.
Because the topic was discussed in private conversations with members of Congress, the anonymous source said.
The framework is needed to ease fiscal problems after Lula won congressional approval for a multi-billion reais package that bypasses constitutional spending caps so his government can boost social spending and fulfill its campaign promise.
The main deficit target for this year, pioneered by the leftist Lula government, is 228.1 billion reais ($44 billion), but the Ministry of Finance recently estimated that the shortfall would be 70.6 billion reais, equivalent to 1.0% of GDP, thanks to expected tax revenues
Earlier Wednesday, Institutional Relations Minister Alexandre Padilha said the government was finalizing new rules, adding that Lula and Finance Minister Fernando Haddad will meet for this purpose. Haddad is expected to present it to the leaders of the lower house of Congress later in the day.
Padilla told reporters that Brazil’s congressional leaders have said that once submitted, fiscal rules should be approved quickly.
(1 USD=5.2024 Real)