Increase in interest expenses worries, says Guedes secretary

The Special Secretary of the Treasury and Budget of the Ministry of Economy, Esteves Colnago, said this Tuesday (1st) that the increase in public debt interest expenses is a concern for the government this year, amid a scenario of inflation. that puts pressure on this expense.

In an event promoted by the bank Credit Suisse, Colnago said that this is one of the reasons why the government emphasizes the need to sell assets and return funds previously lent to public banks. In this way, it would be possible to improve the trajectory of public debt, an indicator that, according to him, is capable of being stable in 2022.

“The variable that concerns us this year is the growth of spending on nominal interest, this is natural, we had a spike in global inflation. The Central Bank is already adopting the necessary measures to combat it, but this implies greater spending on interest,” he said.

The secretary stated that the government is negotiating a return of R$100 billion to the Treasury by the BNDES (National Bank for Economic and Social Development), but predicted that the amount to be returned in 2022 should be around R$60 billion.

In 2021, spending on nominal interest was BRL 448.4 billion, up BRL 136 billion in the year and equivalent to 5.17% of GDP – at the end of 2020 it was 4.18%.

This expense had been on a downward trajectory since 2015, when it stood at 8.4% of GDP. In 2021, therefore, there was a reversal of this trend.

Even with this additional factor in government spending, Colnago said that there are conditions to keep the government’s gross debt at the level of 80% of GDP (Gross Domestic Product). At the end of 2021, this indicator stood at 80.3% of GDP.

The secretary said that the government should revise the projection for GDP growth in 2022 to a value below the last estimate presented in November, of 2.1%. According to him, however, the value should be above market projections – the latest Focus bulletin estimates a high of 0.3% in the year.

“We see that the recovery of investment and the generation of jobs are variables that will allow us to grow greater than the market is imagining”, he said, after stating that there is a reaction of private investment in the country.

At the event, Colnago defended the sale of assets and the concession of public services, citing Eletrobras, Correios, the port of Santos and the airports of Congonhas (in São Paulo) and Santos Dumont (Rio de Janeiro).

Regarding the privatization of the Post Office, he assessed that the discussion on the subject in Congress will be difficult, especially in an election year.

Regarding the discussions in the government regarding the possible proposal to cut fuel taxes, Colnago said that the creation of a price stabilization fund is not a good solution and stressed that he prefers a reduction of IPI (Tax on Industrialized Products).

“We would spend a lot of money and have a very low effectiveness (cutting fuel taxes),” he said. “Reducing IPI is not a measure of embarrassment to governors and mayors, it can make the industry competitive, I see it with better eyes than reducing fuel tax.”

TAX RULES

In the presentation, the secretary defended the creation of a fiscal rule anchored in the public debt, arguing that all the existing rules today seek, in the end, a sustainable trajectory of the government’s indebtedness. The idea had already been anticipated by Colnago in an interview with Reuters in December.

He stated that this discussion will not be rushed and stressed that the country is not yet mature enough to leave the spending ceiling and migrate to other fiscal variables.

According to Colnago, the new rule could use the triggers that already exist in the legislation today to achieve the commitment to indebtedness. Among the existing measures in the current tax regulation, are the freezing of salaries of public servants and suspension of competitions and benefits to civil servants.

The secretary also defended the removal of constraints from the Budget, arguing that the government should not be forced to correct expenses every year, including the minimum wage.

Regarding public debt management, Colnago said that it is easier to sell debt securities linked to floating rates amid the monetary tightening cycle, considering that the Treasury’s medium-term policy is to depend less on these securities.