SAO PAULO (Reuters) – Brazilian ministers on Wednesday pledged to strengthen the country’s fiscal framework, trying to ease market concerns as they prepared to debate how to proceed with a fiscal adjustment that is expected to include spending cuts.
Market participants have questioned Brazil’s ability to maintain its fiscal framework, as mandatory expenses have been rising at a rapid pace, squeezing out room for other spending under a rule that limits overall expenditure growth.
Finance Minister Fernando Haddad told reporters that a constitutional amendment would be needed for the government to strengthen the fiscal framework, adding that negotiations with other cabinet members on the topic were advancing.
He said there was an “important convergence” with President Luiz Inacio Lula da Silva’s chief of staff when it comes to the measures, but noted there was still a “writing challenge” as the leftist Lula government prepares them.
Once the government finds the right formula to make the fiscal framework sustainable over time, Haddad added, market fears surrounding public spending will recede.
“Our job is making the best proposal possible in the direction of making spending fit” within the fiscal rules adopted last year, the minister said, without providing further details.
Haddad made the remarks ahead of a meeting of the government’s budget board later on Wednesday.
The board includes Haddad, Chief of Staff Rui Costa, Planning Minister Simone Tebet and Management Minister Esther Dweck, who lead the debate on proposals that must be presented to Congress.
“Anyone who bets against Brazil will lose. Lula will make the necessary adjustments to maintain the country’s growth, ensure investments and comply with the fiscal framework, bringing expenses within the rules,” Costa wrote on X.
According to two government sources close to the discussions, the ministers are expected to debate fiscal adjustment initiatives at Wednesday’s meeting.
Tebet told reporters that Lula already had “an idea” of what fiscal measures will be needed, but said she could not disclose the size of any proposal, as the president has a “final say” and has not yet given a green light on the options presented.
(Reporting by Eduardo Simoes and Luana Maria Benedito; Editing by Gabriel Araujo and Paul Simao)
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