University Of São Paulo Fiscal Framework Approval Delay May Generate Instability In Budget
The debate about the possible approval of the new fiscal framework continues within different sectors of public administration. The project, which had been approved by the Chamber of Deputies, reached the Federal Senate and underwent some changes that must go through parliament once again. Voting on the program should resume this week and, to have an impact on the 2024 budget, the approval of the new fiscal framework must be carried out by August 31st.
Budget
Heron do Carmo, a professor at the Faculty of Economics, Administration, Accounting and Actuarial Science (FEA) at USP, explains that instability in relation to the budget can be created if approval is not given in time. Thus, there is no provision for the framework to be voted on before the Budget Guidelines Law (LDO) — the law that sets the parameters for budget preparation. “Even if it is approved earlier, there is a forecast that it will include eventual changes in the fiscal framework, but this creates uncertainty regarding the fiscal situation ahead”, observes the specialist.
Brazil currently has improvements in some economic aspects of the country, such as the situation of the external accounts, the inflation targets, the primary surplus and the floating exchange rate, which provide some stability to the national economic situation. However, the fiscal mismatch continues to be a problem for this issue. “Various initiatives were taken, such as, for example, the spending ceiling, which despite criticism brought some positive results, mainly in terms of inflation, interest rates and public accounts”, analyzes Carmo.
Thus, with the emergence of a new government, there was also a need for a new framework which, according to the expert, is essential, as it brings rules and limits to public spending. “Once known, these limits must be respected and thus anchor the expectations of the market and economic agents, which facilitates decision-making regarding investments, for example”, says the economist. Considering these aspects, it is evident that it would be better for the framework to be voted before the Budgetary Guidelines Law, bringing more security regarding the fiscal situation ahead.
Changes
Some changes were made to the bill by the Senate, which was a little less restrictive than the previously approved text. Thus, the House excluded Fundeb and the fund for the transfer of federal resources to the Federal District from the new rule. In addition, a new amendment was accepted that allows the 2024 budget to be sent with conditional expenses.
Carmo also explains that fundamental changes were made by the Senate, such as the issue of Fundeb, which is essential for improving prospects for national development, and the change in the period considered to calculate inflation that serves as the basis for preparing the budget. “The best would be a slightly tighter fiscal framework at the beginning, as envisaged in the Chamber, but it is better to have a rule, even if it is not the best, than to have no rule at all”, he analyzes. Even so, even with the amendments made by the Senate, the project is essential to provide a north to guide economic agents and their decisions.
Finally, it is noted that the future economic perspectives are positive, since only with the announcement of the new framework it was possible to observe a significant improvement in the future perspectives. “This contributed to a reduction in inflation and contributed to the possibility of reducing the interest rate”, he concludes.