By Marcela Ayres
BRASILIA, Nov 8 (Reuters) – Brazil’s reelected President Luiz Inacio Lula da Silva on Sunday reaffirmed his commitment to fiscal responsibility and said he wanted to help bring down high interest rates but stopped short of announcing new measures to address investor concerns.
In a televised address outlining the priorities for his upcoming fourth term, Lula pledged to respect Brazil’s budget rules and said his government would work to create the economic conditions for borrowing costs to fall.
The comments echoed previous commitments that Lula has made since his election victory two weeks ago which weakened the real currency, pushed up long-dated interest rates and hit Brazil’s benchmark stock index as investors worried that he would not do enough to fix the public finances and stop rising debt.
Those concerns have been amplified by campaign pledges that would require additional government spending, raising questions about how the administration can reconcile those promises with its commitment to rising primary surplus targets.
Markets have also been unsettled by his decision so far not to name a finance minister or announce other key appointments.
“The trajectory of public debt and high interest rates concern me which is why I reaffirm my commitment to fiscal responsibility, enabling sustainable social policies and the much-needed expansion of investment,” the leftist leader said in a televised address.
“All of these efforts will be made while preserving fiscal rules,” he added.
The current government has committed to hitting targets for the primary budget while limiting real spending growth to 70% of any rise in revenues. The framework also caps annual expenditure growth at 2.5% above inflation, with a floor of 0.6%.
Lula said boosting investment would be a central goal of his next administration.
“One of the main objectives of our government is to raise investment to more than 20% of gross domestic product, in partnership with the private sector. To that end, we will create the conditions to reduce interest rates,” he said.
Lula won a fourth non-consecutive term on October 25, defeating right-wing Senator Flavio Bolsonaro in a surprise runoff turnaround.
Gross public debt has risen by more than 10 percentage points during Lula’s current term, reaching 82.9% of GDP.
Amid a deteriorating inflation backdrop, the central bank last week halted its rate-cutting cycle and kept borrowing costs at 13.75%, prolonging pressure on households already burdened by record indebtedness equivalent to 50.1% of income.
Economists now see interest rates staying elevated for longer and they have also cut their economic growth forecasts for next year.
(Reporting by Marcela Ayres)
