PEC is a lack of commitment to fiscal balance, says Gustavo Loyola to CNN

In an interview with CNN this Monday (28), Gustavo Loyola, former president of the Central Bank (BC), evaluated that the so-called “PEC do Exult” represents a lack of commitment to the fiscal balance of the country’s public accounts.

“The PEC is a breach of fiscal responsibility in its original form. It increases public spending in the coming years so that the debt x GDP ratio grows a lot and reaches almost 100%”, he said.

“As it stands, it really is a testament to the lack of commitment to fiscal responsibility. There are other ways to accommodate the payment of BRL 600 from the Auxílio Brasil without compromising the public accounts in the way that it would be compromising.”

The former BC president also said that, despite the recurring “holes” in the spending ceiling, “nothing indicates that he is necessarily dead”.

“It is necessary to have a fiscal rule, and the spending cap is one of the options. He has had all these violations over the years, in part well justified because of the pandemic, but he can be recovered ”, declared Loyola this morning.

“Another option is to create another type of tax rule. What we cannot do without is a fiscal rule, because it gives economic agents a horizon on fiscal policy over the years. This brings less uncertainty, more confidence and opens up space for the Central Bank to be able to reduce interest rates more quickly, and thus strengthen economic growth. It is important that there is a credible fiscal rule so that we can have peace of mind in the macroeconomic area in the coming years.”

Check out the full interview in the video above.