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IMF recognizes the importance of structural reforms in Brazil

Economic policy

In a report published this week, the International Monetary Fund (IMF) brings data collected by its technical staff visits to the country in May 2019.

IMF recognizes the importance of structural reforms in Brazil

Economic policy

In a report published this week, the International Monetary Fund (IMF) brings data collected by its technical staff visits to the country in May 2019.

The International Monetary Fund (IMF) published this week (23/7) the Report of Art. IV of Brazil , a document that reflects the institution's view on the visits of its technical team to the country in May 2019, as well as examines the economic data and Brazilian government economic policies.

The report recognizes the importance of structural reforms that the government has been proposing and implementing since the beginning of this administration, such as Social Security Reform, which is considered "indispensable" to improve the country's fiscal situation and whose recent progress is praised. At the same time, the importance of further reforms that the government has been working on, such as the simplification of the tax system and the reduction of budgetary rigidities, is stressed.

Another aspect highlighted by the IMF, in which the Brazilian government has acted, is the need to continue to reduce trade barriers, improve the business environment and adopt measures to increase productivity. The Fund also mentions the Mercosur-European Union Agreement - whose negotiations have recently been concluded - as fundamental for progress in this area.

Gross Public Financing Need

The Ministry of Economy recognizes the quality of the work done by the IMF, which over the years has been refining its assessment tools of the Brazilian economy. In this edition, however, it points out that the methodology of the Fund for Gross Public Financing Need overestimates the projection for this indicator.

The report showed values ​​starting at 17.2% of GDP in 2019 and growing steadily to 31.6% of GDP in 2024. The Treasury conducted exercises to replicate the figures provided by the report, but in neither case was it possible to find figures. close to those of the IMF projections.

In contact with the team responsible for the projections made by the fund, it was understood that the reason for overestimated funding needs data is the way the IMF simulates rollover, which is not consistent with the characteristics of the Brazilian debt. This point is important given that the overestimated projection leads to mistaken conclusions about public debt risks in Brazil.