SAO PAULO (Reuters) – Brazil’s president vowed to defeat the “speculative greed” of financial markets in an interview broadcast late on Sunday and urged Congress to set a good example by cutting spending while the government prepares new budgetary measures.
Left-wing leader Luiz Inacio Lula da Silva told broadcaster RedeTV! “I beat them once and I will win again,” after market jitters over the sustainability of Brazil’s public finances sent the local currency tumbling and interest rate futures soaring.
The Brazilian real recently fell to its weakest against the dollar since March 2021, increasing pressure on the government to quickly implement cuts to demonstrate its commitment to fiscal discipline.
“I am in a very, very serious discussion process with the government… We can no longer, every time we have to make cuts, play on the shoulders of the people who are most in need,” Lula said.
“It is a responsibility of the executive, it is a responsibility of the judiciary. I want to know if they are also willing to give up what is excessive, I want to know if Congress is also willing to make cuts,” Lula added.
Lula’s has generally viewed spending on things like education and social security as investments rather than expenditures, but many economists have warned that the fiscal framework will become unsustainable unless changes are made.
Even the central bank underlined the need for fiscal discipline to combat inflation when it accelerated the pace of monetary tightening at its last meeting.
The fiscal framework combines primary budget objectives with a ceiling on overall expenditure growth up to a certain threshold above inflation. However, because many mandatory expenditures – such as social benefits and pensions – are growing faster, the framework limits the scope for investments and operational expenditure.
(Reporting by Luana Maria Benedito; Editing by Christina Fincher)
