In reaction to criticism directed at the conduct of the government’s fiscal policy, the Ministry of Economy launched an offensive to show that the approval of reforms contributed to improving the scenario to a greater degree than projected at the end of 2018 by the economic team of former President Michel Temer (MDB).
An information note prepared by the Ministry’s SPE (Secretariat of Economic Policy) shows that indicators such as gross debt, primary result and expenditures and revenues as a proportion of GDP (Gross Domestic Product) had a better-than-expected trajectory, despite the negative effects caused by the Covid-19 pandemic.
Gross debt, for example, closed last year at 80.3% of GDP, less than the 81.4% of GDP estimated for 2021 already with the approval of fiscal reforms, which included the pension reform.
On the other hand, the net revenues of the central government (which includes the National Treasury, Central Bank and Social Security) closed last year at 18.2% of GDP, above even the most optimistic projections made at the end of the previous administration.
The conduction of fiscal policy by the team of Minister Paulo Guedes (Economy) has been criticized by economists, who see the improvement in the financial situation as momentary and subject to reversal.
Last year, the central government had a deficit of R$ 35 billion. The result of the public sector as a whole registered a surplus of R$ 64.7 billion, the first since 2013, thanks to the cash supplied by states and municipalities.
The Senate’s IFI (Independent Fiscal Institution), which monitors public finances, has warned that the improvement in the accounts may be fleeting. For 2022, the institution projects a deficit of BRL 106.2 billion, above the BRL 79.4 billion foreseen in the Budget approved by Congress.
The head of the Special Advisory for Strategic Economic Affairs, Adolfo Sachsida, rebuts the criticisms and says that the numbers listed by the SPE prove the importance of the government holding back spending and betting on fiscal consolidation.
Sachsida, who in the first three years of government commanded the SPE, listed the approval of the Social Security reform, the ban on salary readjustments for civil servants in 2020 and 2021 and microeconomic reforms that, according to him, allowed for an increase in productivity.
“The fiscal consolidation process is not ideological. This study was just to show society that our discourse has substance. We are not just talking, we are talking and doing”, he said.
The minister’s advisor said that, if distrust persists, the market can look at the projections made by the “dream team of Temer” at the end of 2018. “We are better than the optimistic scenario”, he said.
Sachsida denies, however, that the need to use estimates from another government to confirm current results indicates a lack of credibility in the current administration.
“Together with the president, our credibility is very good, so much so that the president supports us. With the general public it is also very good,” he said.
Tax adjustment should not be abandoned to reduce fuel price, says Sachsida
The advisor said that the fiscal adjustment should not be abandoned now in the name of lowering fuel prices – an agenda that has been demanded by President Jair Bolsonaro (PL).
Although he avoided more incisive comments about the proposals being discussed in Congress, which could have an impact of more than R$100 billion on public accounts, he expressed concern about the direction of the issue.
“The fiscal consolidation process helps to hold back inflation, including fuel prices,” he said. “We need to find a solution that preserves the fiscal consolidation process. If not, the result will not be satisfactory,” she said.
“I understand the anguish of the deputies, but there are superior instruments to achieve the same objective,” said Sachsida.
According to him, structural changes that bring more competition to the oil and gas sector would be welcome. Cade (Administrative Council for Economic Defense) has already opened an administrative inquiry against Petrobras to investigate possible abuses in the fuel market.
“If we don’t use adequate instruments, instead of decreasing the price of fuel will increase”, he warned.
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