The National Congress overthrew one of the veto (VET 23/2023) of the President of the Republic of Poland, Luiz Inácio Lula da Silva, to the new fiscal framework law (Supplementary Law No. 200 of 2023), which replaced the old spending ceiling as a fiscal anchor in the Union's public accounts. This proposal was approved by the Senate in June and confirmed by MPs in August. The article saved by congressmen is the one that prohibits the government from proposing new exceptions to the main outcome goal for any annual budget guidance (LDO) law.

The device prevents expenses from being deducted from your account primary result fiscal budgets and social security. This will require the government to focus even more efforts on achieving its 2024 zero deficit LDO fiscal target.

During the vote, Senator Rogerio Marinho (PL-RN) stated that the overthrow would be the result of government basing and that returning the provision to the act would prevent the government itself from conducting “creative accounting” and incurring fiscal liability.

— The government proposed an agreement to abolish the device enabling creative accounting, which allowed the impeachment of former president Dilma. When we subtract expenses for the purpose of setting the main result goal, it is as if we had an elephant and someone came up with the idea to hide the elephant under the rug. Of course, the carpet will cover the elephant. But there will be a tumor because it is very large.

However, Deputy Lindberg Farias (PT-RJ) expressed dissatisfaction with the government's direction, saying he “did not know” who coordinated the agreement. In his opinion, the article will make it difficult to manage the current government, which may not be able to maintain some public policies.

— In the worst-case scenario of an economic slowdown next year, Lula could say, “the economy has to grow, I have no intention of cutting back on PACs [Programa de Aceleração do Crescimento]. How can he do this? Exceptional PAC maintenance expenses. What they are doing here, I don't know the details of the negotiations, is closing the last door. Last exit. This is a trap against our government, he warned.

Shortly after the veto on this part of the bill was published, a Technical note of the Budget Advisory and Financial Inspection of the Chamber of Deputies A report was released showing that President Lula's decision will weaken the new fiscal rule and the predictability of the fiscal target if it is not reversed.

“The possibility of excluding expenses for measuring compliance with the primary objective reduces the predictability of the economic objectives pursued. The primary objective is a fiscal policy signal, which will only be effective as such if the commitment expressed is credible. Where higher emergency spending is necessary or convenient, it would be more transparent and realistic to set a less ambitious target from the outset or make a legislative change to reduce the main target, emphasizing the costs and impacts of the intended policy,” the note reads.

Investments

Still regarding the above-mentioned Act, parliamentarians decided to maintain the president's veto on the device, which stipulated that in the event of restrictions on obligations and payments provided for in the Fiscal Responsibility Act (LRF), capital expenditures, within the scope of the executive branch, could be reduced in the same proportion as the reduction of all other expenditures discretionary.

In its justification, the government stated that this provision is contrary to the public interest by “increasing the rigidity of budget management processes, which may have a potential impact on the Union's core expenditure.”

Senator Rogerio Marinho explained why the opposition reached an agreement with the government to maintain the veto on the device.

“We are giving the Ministry of Planning the ability to ensure that in the event of revenue frustration, which is certain to happen next year, the government has the flexibility to make contingency decisions on a non-linear basis. In other words, including those expenses that will have the least impact on budget implementation.

Agência Senado (reproduction authorized based on the quote from Agência Senado)

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