Brazilian government gives up changing “golden rule”

Brazilian government gave up changing the rule that limits public debt, known as  “golden rule”. According to the Finance and Planning ministers, Henrique Meirelles and Dyogo Oliveira, the debate on this theme will be resumed after the vote of the pension system reform, but suspending or relaxing the current requirements has  been discarded.

Established by Brazil's 1988 Constitution, the rule determines that the government can increase its indebtedness only to make investments (in public works or equipment purchase) or refinance public debt. Central government's operating spending, like civil servant wages, general services, air tickets and travelling expenses cannot be financed by public debt.

According to Meirelles and Oliveira, the decision of keeping the rule was made in a meeting this Monday (Jan. 8) morning between the economy ministers and president Michel Temer, who demanded further study on the matter. 

Meirelles informed that the devolution of $ 40,2 billion by the Brazilian Development Bank (BNDES) to the National Treasury will assure the limit is respected in 2018. The Planning minister, however, estimated a hole between $ 46,3 billion and $ 61,8 billion for 2019.

According to a report released by the National Treasury at the end of December, since the Constitution's enactment the “golden rule” was only broken once, in mid 2011.  At the end of that year, nevertheless, the limit was observed. Because of the high fiscal deficits in 2015, 2016 and 2017, the government came close to breaking the rule.

Translated by Mariana Branco