Brazil should not focus solely on improving public accounts, Haddad says

Brazil has scope to further improve public accounts but should not make that its sole focus, Finance Minister Fernando Haddad said on Tuesday, emphasizing that economic growth was essential for any fiscal adjustment.

Speaking at an event hosted by lender BTG Pactual, he said the government would resume its reform agenda and that there were many "good proposals" to be voted on by Congress.

"My assessment remains the same: we have conditions to keep improving public accounts, but we should not focus solely on that," Haddad said.

According to Haddad, government-planned changes to allow formal workers access to lower interest rates on payroll-deductible loans would represent a "revolution."

He also urged Congress to approve a proposal under discussion that would allow the use of payment flows via the country's traditional instant payment system, Pix, as collateral for lower-interest loans.

The minister added that if public revenue reaches around 19% of gross domestic product (GDP) and spending stands at 18% of GDP, Brazil will have a sustainability horizon that will give strength to microeconomic reforms.

As President Luiz Inacio Lula da Silva faces a sharp drop in his approval ratings, allies of the leftist leader have criticized Haddad's handling of the economic agenda in private meetings, local media reported.

Asked about internal disagreements, Haddad said that debate was "normal" but stressed there was "more convergence than divergence" with those closest to Lula compared to two years ago when the president took office.

He also defended the fiscal framework passed under Lula in 2023, which pairs a primary balance target with a cap on real spending growth.

Haddad said the government incorporated several expenditures into the framework, following the approval late last year of a rule limiting the minimum wage increase - a key driver of several budget expenses - to overall spending growth.

"In my view, this is the path to long-term fiscal sustainability in Brazil," he said.