Economists criticize out-of-cap spending and reinforce fiscal responsibility

This Thursday (17), the market reacted vehemently to the PEC of the Explosion and to the speeches of the president-elect Luiz Inácio Lula da Silva (PT) during the COP27, in Egypt. On the occasion, Lula again criticized fiscal anchors, saying that “it’s no use thinking only about fiscal responsibility” 🇧🇷

Economists heard by CNN assess that presenting the expenditures of the PEC of the Explosion, removing the obligation to comply with the expenditure ceiling, does not solve the main problem of the country’s public accounts. In addition, they reinforce that fiscal responsibility is necessary for social responsibility to be exercised.

On Wednesday (16), the vice president-elect, Geraldo Alckmin (PSB) went to the National Congress to deliver the draft of the PEC.

According to the published text, the extra expenditure could reach BRL 198 billion: BRL 175 billion from the Bolsa Família program and another BRL 23 billion from extraordinary revenues that would be directed towards investments, in addition to undefined amounts for universities and environmental programs.

“The exclusion of the Bolsa Família spending cap is an absolutely wrong measure (…) and, worse, it orders it to be excluded from the primary surplus”, said former Finance Minister Maílson da Nóbrega.

The decision, according to him, is just an “accounting maneuver” that could prevent the number from going negative, but which, in practice, continues to keep the government in the red, which results in a further increase in public debt.

“The surplus serves the government to pay part or all of the interest on the public debt and avoid an explosive trend in the debt-to-GDP ratio, which is the main solvency indicator of the public sector and what is closely watched by investors,” explained Nóbrega .

“PEC do Precipice”

Economist and lawyer Elena Landau classified the text as “PEC do Precipício”. For her, the confusion caused by the transition team of the elected government was “unnecessary”.

For Landau, there was already an expectation that a transition to 2023 would be necessary and that it was priced politically, economically, that is, no one thought that the government would enter 2023 with a budget received from the Bolsonaro government.

“I call it the Precipício PEC, because it is taking Brazil to a very high rate of indebtedness”, he declared.

“The borrower who loses with high interest rates. So, when talking about fiscal responsibility, there is no such thing as ‘the market wants it’. There are not three or four people who own the market, there are thousands of Brazilians who depend on interest rates and credit”, he adds.

In the economist’s evaluation, Lula reversed steps. Firstly, he should have looked at the budget received, cut the fat, review fuel exemptions, in short, pay attention to a series of issues that are poorly placed in the budget – including very little social resources.

responsibility first

“Lula’s speech implies a contradiction between fiscal responsibility and social responsibility. Indeed, fiscal responsibility is a condition for exercising social responsibility. Without fiscal responsibility there is no trust. If there is no trust, interest rates are high and investment is low. As a result, the economy does not grow and those who suffer are the poorest”, said economist and former president of BNDES, Edmar Bacha, in an interview with CNN.

For the former president of BNDES, if the transition team had already presented a responsible name to lead the Economy, the environment would be “less cloudy”.

“If there was already someone in charge of the Economy, without a doubt, the environment would be much less cloudy than simply asking for a license to spend without showing what the economic and financial plan is to guarantee the balance of public accounts”.