IMF Backs Brazil’s Fiscal Reform, ‘Ambitious’ Green Agenda

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May 16 (Reuters) – The International Monetary Fund on Tuesday said it “strongly supports” Brazil’s efforts to improve the country’s fiscal position, while also commending the country’s “ambitious agenda” to have a sustainable, inclusive, and green economy.

“Enhancing Brazil’s fiscal framework, broadening the tax base, and tackling spending rigidities would support sustainability and credibility,” the leader of an annual mission to the country, Ana Corbacho, said in a statement after the Fund’s visit.

Brazil’s finance ministry in late March unveiled new fiscal rules to balance limits on spending growth under the administration of President Luiz Inacio Lula da Silva, who has vowed to boost social programs and public investment.

The new rules limit spending growth to 70% of Brazil’s revenue growth in the prior 12 months.

The government’s proposed fiscal framework also targets a zero primary deficit in 2024, followed by a primary surplus equal to 0.5% of GDP in 2025 and 1% of GDP in 2026.

IMF “staff recommends a more ambitious fiscal effort that continues beyond 2026 to put debt on a firmly declining path, while protecting social and investment spending,” Corbacho added in the statement.

Brazilian lawmaker Claudio Cajado on Monday presented a revised version of the government’s bill to ensure the rules have penalties in case of non-compliance by the government.

Corbacho also noted Brazil’s efforts to “steer a sustainable, inclusive, and green economy” by cracking down on illegal deforestation, for example, and “leveraging competitive advantage in renewable energies.”

In its first months, the Lula administration has revived an international funding campaign to fight deforestation and has sought financing for green industry and renewable energy in partnership with China.

Reporting by Rodrigo Campos, Brendan O’Boyle and Carolina Pulice; Editing by Anthony Esposito
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