Lula's fiscal adjustment set to target the fiscal goal and tax breaks; government rules out cuts to social programs

Summary written by the Panorama newsroom from the sources listed below. Facts are attributed to the original publications.

Since Luiz Inácio Lula da Silva (Workers' Party, PT) was reelected to a fourth term, the financial market has reacted with a stock market drop and a rise in the dollar, and the president has come under pressure to announce who will head the Finance Ministry, g1 reports. Based on the campaign, analysts concluded that adjusting the public accounts would not be a priority.

In an interview with TV Globo, Lula said the growth of public debt is a concern but argued that the solution lies in stimulating the economy, not necessarily in cutting spending, especially cuts that would affect the poorest. Current Finance Minister Dario Durigan, whose continuation in the post has not been confirmed, has spoken of an adjustment of about two points of GDP, which would take the accounts from a primary deficit of about 0.4% of GDP in 2026 to a surplus of 1.6% in 2030.

According to the report, the Independent Fiscal Institution (IFI), linked to the Senate, estimated in June that a surplus of 2.1% of GDP would be needed just to stabilize public debt.

Among the measures under study signaled by government officials are a more explicit commitment to the fiscal target, with a bill to set the center of the 2027 target, a surplus of R$73.2 billion (0.5% of GDP), as the goal; a review of tax breaks; and new limits in the fiscal framework to curb spending growth.

Off the radar are economists' proposals such as ending real increases in the minimum wage, delinking pensions from the national wage floor and targets to gradually lower interest rates, an option Durigan denied is under consideration. Lula and the minister have also ruled out cuts to social programs. "We will never propose measures that harm the poorest people," Durigan said.