A hot topic in the political arena, many are asking: What is a fiscal framework? It is simply a set of measures for conducting fiscal policy - controlling a country's spending and revenue. With this, the government seeks to ensure credibility for the economy and for the financing of public services such as health, education, and public safety.
The new fiscal framework proposed by the Federal Government provides a general rule for increasing spending from 2024 to 2027. According to information from the Federal Senate's website, the real growth of expenses is limited to 70% of the revenue variation recorded in the last 12 months. To avoid distortions during periods of very high or very low revenue, the text establishes a safety margin: spending can grow by at least 0.6% and at most 2.5% per year.
According to PLP 93/2023, the Budget Guidelines Law (LDO) project must indicate the primary result targets of the Union for the next four years, with a tolerance margin of 0.25% of Gross Domestic Product (GDP) plus or minus. The Executive Branch's intention is to eliminate the primary deficit in 2024 and achieve surpluses of 0.5% in 2025 and 1% in 2026. According to tax law specialist João Paulo Lyra from the law firm Pagotto Rizzato e Lyra Sociedade de Advogados, "the government needs to meet the target set in the Budget Guidelines Law (LDO), otherwise the fiscal framework will come with stricter rules for limiting expenses," he states.
And why is this spending control important? Because we citizens, entrepreneurs, and investors need to have confidence in what is being done with public accounts, so that there are no debts that result in interest, inflation, and that ultimately affect the classes that need it most in Brazilian society," points out the lawyer. Now we must wait for the approval of the Chamber of Deputies.
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