Spending cap was too restrictive and we need a new rule, says economist

For Nelson Marconi, economist and professor at the Getulio Vargas Foundation (FGV), the current spending cap rule was very restrictive with government spending and “is outdated”.

For Marconi, who spoke in an interview with CNN this Sunday (27), it is necessary to think about a new fiscal framework that is broader, contemplating other indicators of public accounts than just spending, such as the debt level.

“The ceiling really showed an instrument that has now been surpassed, because it was very restrictive from the point of view of correcting expenses for inflation,” said Marconi.

Approved in 2016, the spending ceiling stipulated that the government budget can only grow, each year, the equivalent of the previous year’s inflation, for 20 years. In practice, spending is frozen in real terms.

“Now we need another instrument, a new broader rule. He has to combine both the control of debt evolution, which is the main long-term indicator, and primary expenditure.”

Marconi also defended that the president-elect Luiz Inácio Lula da Silva soon open the debate on what could be the changes in the current fiscal rule, as well as present his economic team, which has been postponed by the PT – “it would be much easier for him to approve the Transition PEC”, he said.

Watch the full interview in the video above.