In Brazil, the local economic team is going into damage control mode to reassure investors and ensure that the country’s government is complying with fiscal rules, even as President Luiz Inacio Lula da Silva is pushing for a decision to increase social spending.
Recently, concerns about the fiscal outlook of the Latin American country have intensified. Against this background, investors’ actions to sell the real and price in several interest rate hikes last week have intensified. The mentioned concerns were further heightened after Luiz Inacio Lula da Silva announced a plan to increase the number of families benefiting from cooking gas subsidies on August 26.
The program’s price tag is likely to grow nearly half next year before rising to 13.6 billion reals ($2.4 billion) in 2026. The way the government considers paying for it has become a cause for concern among investors.
A proposal sent to Congress stipulates that at least part of the gas subsidy could skirt the Brazilian fiscal rules through an accounting maneuver making payments be considered as tax expenditures that low government income rather than primary spending that is subject to caps imposed by law.
Brazil’s Finance Minister Fernando Haddad did not participate in the discussion of the bill sent to Congress. The media, citing the official, say that the minister will try to block any attempt to circumvent the fiscal limits. Fernando Haddad’s team will work with Congress in a bid to change the bill so that no non-statutory spending. This was reported by the specified official, who used the right of anonymity.
As we have reported earlier, Brazil’s Central Bank Delays Launch of Recurring Payments Feature.
