About Fiscal Policy

Fiscal policy reflects the set of measures by which the Government collects revenues and performs expenses in order to fulfill three main functions: macroeconomic stabilization, income redistribution and resource allocation. The stabilization function consists of promoting sustained economic growth, low unemployment rate and price stability. The redistribution function aims to ensure equitable distribution of income. Finally, the allocation function consists of providing efficient public goods and services delivery, offsetting market failures.

Fiscal policy results can be evaluated from different perspectives, which can focus on measuring quality of public spending as well as ide ntifying impact of fiscal policy on populations' welfare. Several indicators can be used for fiscal analysis, especially the ones analyzing flows (primary and nominal results) and stocks (net and gross debt). These indicators relate to each other, considering that stocks are made by flows. So, as an example, nominal result affects gross debt stock.

Primary fiscal result is the difference between primary revenue and primary expenditure during a given period. Nominal fiscal result is primary result plus net interest payment. Thus, Government obtains fiscal surplus when revenues exceed expenses in a given period; on the other hand, deficit happens when revenues are lower than expenses.

In Brazil, fiscal policy is managed with a high degree of fiscal responsibility. Responsible use of public resources aims at gradually reducing net debt as a percentage of GDP, in order to contribute to stability, economic growth and development of the country. Specifically, fiscal policy aims at job creation, public investment increase and social security expansion, with emphasis on reducing poverty and inequality.