Brazil’s fiscal plan faces resistance from Lula

Brazil’s fiscal plan faces resistance from Lula

A proposal to shore up Brazil's fiscal accounts is already running into resistance from members of President Luiz Inacio Lula da SilvaLula da Silva's cabinet, even though it delays the task of stabilizing public debt until the end of his term.

The plan was presented by Finance Minister Fernando Haddad to Lula and other cabinet members, including Chief of Staff Rui Costa, during a Friday meeting that was inconclusive, according to government officials familiar with the discussion, who said the debate will continue on Monday.

All officials requested anonymity to reveal details of the private meeting.

The discussion around the new fiscal rule, which is crucial to appease investors who are worried about excessive government spending, has been delayed partly because Haddad and Costa aren't seeing eye to eye on several topics, according to three government officials.

Some members of Lula's cabinet, including Costa, worry that the fiscal rule could be an obstacle to the social spending promised by the president.

Although Lula had said he would announce the new fiscal rule before he traveled to China on March 25, an adviser close to him now says he is no longer committed to that deadline. Haddad has said he d like to unveil the plan before the central bank will decide on interest rates next Wednesday.

Fiscal surpluses would be needed to stabilize public debt.

The Treasury estimated earlier this year that Brazil's gross debt would reach around 80% of GDP by 2026 and it would reach 73.1% of gross domestic product by the end of the year, after Lula received congressional approval to increase social spending.

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