Former Treasury Secretary Jeferson Bittencourt warns of a potential “death blow” to Brazil’s economic strategies due to severe budget cuts, ranging from R$15 billion to R$30 billion next year, driven by rising mandatory costs. Historically, Brazil’s fiscal policy relied on meeting primary account targets and a public spending cap, but recent revisions have jeopardized these pillars, delaying a balanced budget until 2028. Bittencourt emphasizes the importance of maintaining the spending cap to preserve fiscal discipline.
The government’s push for increased spending challenges the fiscal framework, prompting debates on modifying fiscal laws. Current projections show a need for reducing discretionary government spending to counter rising expenditures exceeding growth limits. Despite this, the government has been hesitant to make cuts, exacerbating fiscal difficulties alongside high real interest rates.
Economists like Gabriel Leal de Barros and Solange Srour warn of a potential collapse of Brazil’s fiscal framework without significant reforms, as the credibility of temporary measures diminishes. As Brazil faces a critical crossroads, the future of its fiscal policy and economic stability hangs in the balance, impacting every citizen.