Brazil’s Finance Minister signals uncertainty over fiscal package announcement this week

4:31 pm Wednesday, November 13th, 2024

BRASILIA (Reuters) – Brazil’s Finance Minister Fernando Haddad said on Wednesday he is uncertain whether there is enough time to announce a spending containment package this week, adding that it will be released once President Luiz Inacio Lula da Silva gives the go-ahead.

The market is eagerly awaiting the new measures. Local fiscal concerns combined with inflationary fears tied to U.S. President-elect Donald Trump’s proposals have led to currency weakening and an increase in long-term interest rates in Brazil.

Speaking to reporters in Brasilia, Haddad stressed that the package is centered on keeping expenditures under the same general rule that governs a fiscal framework passed last year.

Such a framework combines annual primary budget targets with an overall cap for spending growth of up to 2.5% above inflation.

“(This means expenditures) following the same rule or something similar, but achieving the same objective,” Haddad said.

Mandatory expenses, such as pensions and some social benefits, have been rising far above the general cap, compressing the budget space for other expenses, such as operational costs.

Economists warn this dynamic could render the new fiscal framework unsustainable within a few years, diminishing its effectiveness in controlling the rising public debt.

Haddad said the fiscal impact of the package is “significant” and reinforces the government’s commitment to the fiscal rules established last year, but declined to discuss specific figures.

Following a meeting with Defense Minister Jose Mucio earlier on Wednesday, he said the the government would consider adding further measures to the package.

His remarks come amid reports that the government plans to tighten pension rules for military personnel, which currently allow, for instance, payments to relatives of service members expelled from the armed forces.

Haddad spoke to the press after a meeting with Lower House Speaker Arthur Lira, to whom he said he had presented the “general outlines” of the upcoming measures.

(Reporting by Victor Borges in Brasilia; Writing by Marcela Ayres; Editing by Chizu Nomiyama)