Brazil announces spending cuts of nearly $12 billion
Finance Minister of brazilFernando Haddad announced this on Wednesday cuts in public expenditure which the government will allow save 70,000 million reais ($11,800 million/day) 11,160 million euros) in the next two years.
Haddad has also confirmed this Income tax exemption for those earning up to 5,000 riyals ($840) per month, a measure that has caused panic in the stock market this Wednesday and driven the dollar to historic highs in the country.
According to the minister, a part of the savings will come in expenses Reform of military pension systemWith the establishment of the minimum age for going into the reserve and limits for this type of retirement transfer.
“These measures counter privileges that are inconsistent with the principle of equality. We are going to correct excesses and guarantee that all officials are subject to constitutional limits,” Haddad said in a statement on the national network. The fiscal package expected by financial markets for several weeks.
This is how he proposed Change in rules for salary bonus paymentAn annual benefit given to workers under a number of conditions, and in the distribution of resources available to MPs attending their electoral fief.
Haddad also guaranteed that minimum wage increase “It will continue to rise above inflation, in a sustainable way, but under the new fiscal regime.”
“Facing the changing external scenario, conflicts and trade wars, we have to take even more care of our own at home. That is why we are taking the necessary measures to protect our economy,” he said. In his opinion, the initiative “reinforces the government’s commitment to the financial stability of the country.”
“They’ll pay a little more” for those earning more than $8,400 per month
Haddad protests the cuts income tax exemptionA campaign promise from President Luiz Inacio Lula da Silva, whose term ends in January 2027.
Currently, the official discount limit is up to 2,259.20 reais ($380). extension of that limit This will benefit approximately 35 million taxpayersAccording to estimates by the National Association of Federal Treasury Auditors.
The announcement caused serious turmoil in the Brazilian financial market. The Sao Paulo stock market fell 1.7% and the dollar reached a historical record (5.91 reais).
financial agent They fear that this measure may make it difficult to control the public deficit.Which currently amounts to close to 10% of the country’s gross domestic product (GDP), and makes announced expenditure controls useless.
However, to offset this potential decline in revenue, Haddad has indicated Those who earn more than 50,000 reais ($8,400) per month “will have to pay a little more”. Of income tax.
According to forecasts from the government, markets and some international organizations, Brazil’s economy will grow above 3% this year, despite the high fiscal deficit. Furthermore, the country remains with one of the lowest unemployment rates (6.4%) in the last two decades.
Despite good macroeconomic data, Lula’s popularity is at its lowest level (35.5%) since taking power in January 2023, according to a survey released this month by the National Transport Confederation.