Lula team readies Brazil fiscal plan in bid to calm market jitters

Résumé détaillé

In bid to calm market jitters.

President Luiz Inácio Lula da Silva’s economic team is preparing to send proposals to Congress by next week aimed at showing investors how his government intends to meet fiscal targets in the coming years, according to people familiar with the matter.

Officials have been discussing a package of spending restraints with lawmakers that could amount to an adjustment of between 50 billion reais and 60 billion reais ($10.7 billion) in 2027 compared to this year’s budget, one person said, asking not to be identified because the talks are private.

The measures are designed to give the government more room to freeze spending if fiscal targets are at risk, the person said. Another part of the package would prevent extraordinary revenue from automatically increasing constitutionally mandated minimum spending on health and education.

A similar mechanism already applies for years when the government runs a primary deficit, and officials are considering extending it to when the government posts a surplus, the person said.

Members of the president’s economic team have discussed the proposals with lawmakers in recent days, according to the people. Lula has been advised to move quickly to reassure financial markets after his surprise reelection rattled investors who expected a change in economic policy under a new administration.

The finance ministry didn’t immediately respond to a request for comment sent outside normal business hours.

Lula’s reelection dashed investor hopes that a change in leadership would usher in greater spending restraint and help the central bank lower inflation to its 3% target. The 81-year-old leftist increased expenditures through a series of stimulus measures during his campaign, fueling concerns that fiscal policy could remain loose during his new term.

Lula has also been advised to quickly announce who will lead his economic team in the next administration, according to the people.

The debate comes as Lula and his advisers weigh how quickly to tighten fiscal…

Début de l'article, extrait de Moneyweb. Pour lire la suite, ouvrez l'article chez le média.