# Lula's Fourth Term Fiscal Strategy: Balancing Growth and Budgetary Discipline The administration aims for a gradual fiscal surplus while protecting core social programs. - **Source:** [G1 – Política](https://g1.globo.com/politica) - **Published:** 2026-11-08 - **Topic:** [Business](https://brifing.si/c/business) - **Original article:** - **On Brifing:** https://brifing.si/s/cc30bd32-45f7-428b-bcc3-61ab2b6f45de ## Fiscal Adjustment Goals The administration plans a gradual fiscal adjustment aiming for a primary surplus of 1.6% of GDP by 2030. This represents a significant shift from the projected 0.4% deficit in 2026. Officials emphasize that this transition will be consistent, avoiding abrupt changes while maintaining long-term social policy commitments for the population. ## Market Reaction and Concerns Financial markets responded to the election results with stock market declines and currency volatility. Economists have lowered growth projections while raising inflation estimates. The Central Bank recently maintained the Selic interest rate, keeping Brazil's real interest rates among the highest globally, reflecting ongoing investor caution regarding the government's fiscal trajectory. ## The Fiscal Framework Mechanism The current fiscal framework, introduced in 2024, ties expenditure growth to revenue performance rather than inflation. The government intends to reinforce this by targeting the center of the fiscal goal for 2027. This target is set at a primary surplus of R$ 73.2 billion, or 0.5% of the national GDP. ## Tax Benefit Revisions To improve public accounts, the government is reviewing tax benefits that are not constitutionally mandated. A measure established in late 2026 mandates a 10% annual reduction in these incentives. The Ministry of Finance classifies changes to offshore taxation and exclusive funds as part of this broader strategy to increase revenue. ## Excluded Policy Options The government has explicitly ruled out several austerity measures suggested by some economists. These include ending real wage increases for the minimum salary and decoupling social security benefits from the national floor. Officials maintain that cutting social programs is not on the table, prioritizing the protection of the poorest citizens. ## Interest Rate Debate Proposals to set specific targets for interest rate reductions have been dismissed by the current economic team. Critics of such proposals warn that lowering the Selic rate too aggressively could trigger capital flight and currency devaluation. The government prefers focusing on primary surpluses to create conditions for natural interest rate declines. ## Budgetary Constraints and Exceptions Despite the push for a surplus, significant expenditures remain outside standard fiscal limits. Approximately R$ 64.7 billion in judicial debt payments, known as precatórios, along with specific defense, health, and education projects, are exempt from these constraints. These exceptions were previously approved by Congress to provide flexibility for essential government operations. ## Long-term Economic Outlook The Independent Fiscal Institution suggests that a 2.1% GDP surplus is required to fully stabilize public debt. While the government targets 1.6% by 2030, the challenge remains balancing these fiscal goals with campaign promises. Success depends on sustained economic growth and the effective implementation of the current fiscal framework rules. ## Sources covering this story - https://g1.globo.com/economia/noticia/2026/11/08/ajuste-nas-contas-publicas-o-que-esta-na-mesa-de-lula-e-o-que-esta-fora-do-radar-do-presidente.ghtml — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._