We need an effective spending cap, says Giambiagi

Fabio Giambiagi , associate researcher at FGV/Ibre (Brazilian Institute of Economics at Fundação Getulio Vargas), pointed out, in an interview with CNN Arena , on Friday (4), that whoever is elected in 2027 will have to review the fiscal framework .

The economist argues that the new rule should be more efficient in terms of cost containment.

"One of two things: either we adopt more flexibility, which allows us to spend more; or we adopt another set of specific rules that are effectively consistent with the framework. [...] We advocate adopting an effective ceiling, a 'super ceiling'," he pointed out.

For the Ibre researcher, the new fiscal framework, suggested by the government and approved by the National Congress in 2023, has presented inconsistencies from the beginning.

"[A] problem that was clear from the beginning to many experts and is now becoming crystal clear to everyone is that the rule, although reasonable, was inconsistent with some particular rules governing specific expense items," he explains.

Giambiagi is referring to spending that has been growing at a faster pace than that allowed for total outflows. While the framework limits spending growth to 70% of the previous year's revenue, economists have been warning that spending on social benefits, for example, is showing faster growth.

"The political system found a way to put a series of items in a regime in which the ceiling does not apply. It is as if I said: 'I am going to follow a very strict diet, but between 8 and 9 at night I can eat anything'. So, it is not exactly a regime, and the same thing applies to the framework", he concludes.