Finance Minister Fernando Haddad (PT) responded this Monday (10/11) to criticism of the government of President Luiz Inacio Lula da Silva (PT) regarding fiscal issues. In an interview in Sao Paulo, the head of the economic team reiterated the current administration’s commitment to fiscal responsibility and complained about President Lula’s classification of his performance as “influenza x influenza” in his analysis of his third term.
“The country’s fiscal situation has been much worse recently, under Temer and Bolsonaro,” Haddad said in an interview with CNN Brasil in the capital Sao Paulo. “Look at the country’s fiscal data. The primary budget deficit was about 2% of GDP. Today we are talking about balancing the public account with a slight surplus next year. The country’s fiscal situation has improved.”
“We are going to effectively liquidate the Payroll Protection Fund. We are going to pay 100% of the fan debt, which is an expense contracted under the previous government with no funding source. We are normalizing the BPC curve (Recurring payment benefits) This is also an amendment to the law in 2021, making the eligibility criteria more flexible,” the Minister continued.
Haddad said Lula’s government faces “some very serious problems inherited from the previous government” and that we have consistently succeeded in resolving them. “We were able to deal with a legacy that was very complex to manage,” he claimed.
target system
In the interview, Haddad was asked about changes to the country’s inflation targeting system starting this year, replacing calendar-year targets with continuous targets.
For continuous targets, targets are now expressed as the cumulative 12-month change in a widely published price index, calculated monthly, rather than as a January-to-December (calendar year) change.
Lula’s government also changed the deadline for reviewing non-compliance with targets from 12 months to six consecutive months.
Therefore, if the targets “exceed” this period, i.e. deviate from their respective tolerances, the Central Bank (BC) Governor will have to publish a note in the Monetary Policy Report and send an open letter to the Minister of Finance explaining the reasons for non-compliance.
According to the National Monetary Council (CMN), the inflation target for this year is 3%. There is a tolerance of 1.5 percentage points up or down, so staying between 1.5% and 4.5% will meet your goal.
“After 28 years of inflation targeting, we made an important change. That is, B.C. is not obligated to meet a continuous target every year. There could be supply shocks, currency depreciation due to external shocks, droughts…Brazil was one of the few countries in the world with a calendar-year target. This was a very big mistake from a conceptual perspective,” Haddad explained.
“We have modernized Brazil’s inflation targeting system. Thanks to intelligence, we can continue to improve fiscal policy year after year. Let’s use intelligence to de-ideologize the debate a little bit,” the minister continued.
“It’s more like the flu around the government than it is about the economy or economic indicators.”
According to the head of the economic team, “fiscal policy adjustments are made every year.” “Each year we take another step towards account reconciliation, always being careful not to penalize those who need it most,” he said. “Accounts need to be adjusted, but who is responsible for making those adjustments? We have identified a set of unacceptable privileges and have addressed what we believe to be a priority of reducing privileges that no longer fit within the budget.”
Government performance
In an interview with CNN Brazil, Fernando Haddad reiterated some of the achievements of the Lula government in the economic field.
“We are celebrating a series of economic indicators for our country. This will be the highest average economic growth rate since 2010, the lowest inflation rate accumulated over four years in Brazil’s history, the lowest inequality index in the history of our country, the lowest unemployment rate in the IBGE historical series, and the best major result accumulated since 2015,” the minister said.
“The world is not in a simple situation. Here we see our neighbors, Argentina, Venezuela. If you take Europe, it has slowed down sharply. U.S. tariffs and government difficulties (by donald) Trump. However, we have a situation in which Brazil can continue to do what it needs to do effectively and create an economic environment that is very favorable for investment,” he concluded.
About The Author
