Lula’s government should revise Brazil’s mandatory spending constraints, says Haddad

BRASILIA (Reuters) – Brazil’s government should revise the rules for increasing mandatory expenses and budget constraints before the end of the year, once reform of the tax system has been decided, Finance Minister Fernando Haddad said.

“What we want to discuss, after the tax reform, is a rule that ends the chopping and changing, and gives greater stability to this type of spending,” Haddad said in an interview published on Saturday by newspaper Folha de S.Paulo.

Progressive governments do away with rule that links spending to revenue growth, he said, and then conservative governments come along and reintroduce them, ending their obligation to spend fixed amounts in areas such as education and health.

Brazilian governments permanently face spending difficulties because 95% of the federal budget is tied to obligatory expenditure, leaving only 5% for discretionary spending.

When they presented the new fiscal framework that proposes limiting real growth in public spending, Treasury officials said it would be necessary to revise the floor for spending on health and education, which is currently linked to the level of government revenues, to avoid reduction in other areas.

Haddad said he could not anticipate which expenses would be revised, whether they would include the readjustment of the minimum wage and the remuneration of public servants, because those decisions were up to President Luiz Inacio Lula da Silva.

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