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Financial markets’ concern about Brazil’s rising public debt is justified as investors have legitimate questions about the spending trajectory that the government needs to address, the finance minister said. Tax authorities of the country.
Dario Durigan42, has reiterated this message in meetings with investors and the press since taking office in March, succeeding Fernando haddad. Basically, it states that the government of the president Luiz Inácio Lula da Silva He has kept his fiscal promises and will continue to do so, despite understandable investor concern about the prospects for a possible new term for the leftist leader.
“What the market is asking today, with some justification, is what the trajectory of mandatory spending and debt will be from now on,” he declared in an interview with BloombergNews on Monday. “I say it myself, without avoiding the issue: we have to address it.”
The message has not resonated with investors, who see uncontrolled spending as a key source of fiscal uncertainty that fuels inflationary expectations. Brazilian assets posted some of the biggest global losses last week, as Lula consolidated his front-runner position in the polls. The real weakened in all five sessions, and foreign investors withdrew more than 13.5 billion reais ($2.6 billion) from the local stock market this month through August 12.
These concerns have helped keep inflation expectations above the 3% target through 2028, complicating the central bank’s effort to reduce its benchmark interest rate of 14% annually.
Durigan described fiscal policy as the main tool at the government’s disposal to reduce Brazil’s high structural interest rates. While it’s not the only reason borrowing costs are high, he said, it’s the one factor management can control.
“There are several factors that explain this, and in particular right now we are going through a period of electoral uncertainty,” he said. “It is natural that we understand it, without exaggerating the magnitude of the problem.”
