INSS is yet another sign of the need for a new fiscal rule, says Giambiagi

For Fabio Giambiagi , associate researcher at FGV/Ibre (Brazilian Institute of Economics at Fundação Getulio Vargas), the government seeking the STF (Federal Supreme Court) to remove the INSS (National Institute of Social Security) reimbursement from the fiscal target and the framework limit "is yet another small sign that this set of rules will inevitably have to be modified in 2027".

The current fiscal rule , approved by the National Congress in the first year of Lula's third term, was created by the government itself. It establishes that spending cannot grow more than 70% of the previous year's revenue.

Giambiagi noted, in an interview with CNN Arena on Friday (4), that "the credibility of the fiscal framework was no longer a big deal", so that, for the economist, it is clear that "whoever" is elected in the next election, that someone will have to write a new fiscal rule.

"One of two things: either we adopt more flexibility, which allows us to spend more; or we adopt another set of specific rules that are effectively consistent with the framework. [...] We advocate adopting an effective ceiling, a 'super ceiling'," Giambiagi pondered.

The economist said the rule was inconsistent from the start, as a range of expenditures within the budget grew faster than the budget as a whole allowed.

With these expenses growing rapidly — such as those linked to social benefits — putting pressure on others, Giambiagi is not surprised that the government is trying to make ends meet with resources outside the budget.

"The political system found a way to put a series of items in a regime in which the ceiling does not apply. It is as if I said: I am going to follow a very strict diet, but between 8 and 9 at night I can eat anything. So, it is not exactly a regime, and the same thing applies to the framework", he concludes.