Brazil's Lula urges Congress to cut spending to help 'beat' financial markets

Brazil's president vowed to beat the "speculative greed" of financial markets in an interview broadcast late on Sunday and urged Congress to set an example by cutting spending as the government readies new fiscal measures.

Leftist leader Luiz Inacio Lula da Silva told broadcaster RedeTV! "I beat them once and I will win again," after market jitters over the sustainability of Brazil's public finances sent the local currency tumbling and interest rate futures soaring.

Brazil's real has recently dropped to its weakest against the dollar since March 2021, piling pressure on the government to introduce spending cuts quickly to show it is committed to fiscal discipline.

"I am in a very, very serious discussion process with the government... We can no longer play, every time we have to cut spending, on the shoulders of the people most in need," Lula said.

"It's a responsibility of the executive, it's a responsibility of the judiciary. I want to know if they are also willing to give up what is excessive, I want to know if Congress is also willing to cut spending," Lula added.

Lula's has typically viewed spending on things like education and social security as investments rather than expenses, but many economists have warned the fiscal framework will become unsustainable unless changes are made.

Even the central bank underscored the need for fiscal discipline to counter inflation as it accelerated the pace of monetary tightening at its last meeting.

The fiscal framework combines primary budget targets with a cap for overall spending growth to a certain threshold above inflation. However, with many mandatory expenses - such as social benefits and pensions - growing at a faster rate, the framework restricts room for investments and operational spending.