BRASILIA, Aug 31 (Reuters) – Brazil’s Finance Minister Dario Durigan said on Monday that some social programs could eventually cease to be purely mandatory expenditures, a move he said would give policymakers greater flexibility in managing the federal budget.
Durigan said at an event hosted by BTG Pactual that placing certain programs under what the government calls “flow control,” such as the Bolsa Familia cash-transfer program, would create incentives for policymakers to improve program oversight and beneficiary screening.
“If you have a flow-control framework, rather than a hard entitlement, public managers are encouraged to optimize the resources available to them because there will be pressure from others waiting to receive those benefits,” Durigan said.
“They will seek to use resources more efficiently by removing beneficiaries who are no longer eligible,” he added.
Under Brazil’s current framework, mandatory expenditures must be paid regardless of budget conditions, while spending subject to “flow control” can be adjusted to fit available fiscal space.
In practice, this gives policymakers greater flexibility over enrollment, beneficiary reviews and the pace of spending growth.
Economists have long identified the rapid growth of mandatory spending, particularly social security and social benefit programs, as one of Brazil’s main fiscal challenges because it steadily squeezes room for other expenditures.
Many argue that, without changes to the dynamics of mandatory spending over the medium term, Brazil’s current fiscal framework is unlikely to deliver a credible stabilization of public debt.
Durigan defended the rules, arguing they do not need to be replaced but strengthened. He added that additional triggers within the framework to curb the growth of mandatory spending would be a welcome step.
The minister reiterated that lowering interest rates remains the government’s biggest economic challenge.
He argued that fiscal policy has a role to play by delivering growing and recurring primary surpluses, a trend he said should become evident from next year onward.
(Reporting by Marcela Ayres; Editing by Mark Porter and Alistair Bell)
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