Brazilian assets had suffered a sell-off in recent weeks as markets fear fiscal deterioration amid government reluctance to cut spending, which led to investors’ concerns about the government’s ability to comply with the fiscal framework approved last year.
On Wednesday, however, the Brazilian real rose nearly 2% against the U.S. dollar in spot trading, as market participants awaited details from the meeting, and after Lula said earlier on the day that his government would remain committed to fiscal responsibility.
“The first thing the President ordered us to do was ‘comply with the fiscal framework'”, Finance Minister Fernando Haddad told journalists in Brasilia after the meeting, referring to a constitutional law that sets a limit to government spending.
Haddad also said that Lula approved suggestions the officials had presented in the meeting to cut 25.9 billion reais ($4.7 billion) in government spending, which would allow Lula’s administration to comply with the fiscal framework next year.
These measures would include a greater scrutiny to cut social benefits from people who are ineligible.
Haddad added that some of the measures could be brought forward if required to help the government meet the fiscal rule this year.
($1 = 5.5580 reais)
Source: Economy - investing.com
