Brazil's Haddad vows to 'restore' public accounts in first speech as finance minister

© Reuters. FILE PHOTO: Brazil's former President and presidential candidate Luiz Inacio Lula da Silva and Sao Paulo Governor candidate Fernando Haddad react at an election night gathering on the day of the Brazilian presidential election run-off, in Sao Paulo, Brazi

BRASILIA (Reuters) - Brazil's new Finance Minister Fernando Haddad said on Monday he would propose a new fiscal anchor in the first half of this year as the administration of leftist President Luiz Inacio Lula da Silva works to "restore" public accounts.

A former mayor of Sao Paulo, Haddad took office with the challenge of presenting a credible fiscal framework after Congress passed a package increasing Brazil's spending cap to ramp up social expenditures and meet Lula's campaign promises.

In his first speech in office, Haddad said the government would not accept the "absurd" 220-billion-real ($41.19 billion) primary deficit forecast in this year's budget, indicating it will work to reduce it.

He added he would work with "full emphasis" on the recovery of public accounts while fighting inflation, promising to send to Congress the proposal for a new fiscal anchor in the first half of the year seeking to ensure public debt sustainability.

Haddad did not mention Lula's decision the day before to extend a costly tax exemption on fuels.

Prior to taking office, Haddad had stated that the measure - which has an annual impact of 52.9 billion reais - would not be extended.

Fiscal uncertainties in Brazil, Latin America's largest economy, have delayed market bets regarding the beginning of monetary easing, which would help to ignite domestic activity in a scenario of global slowdown.

A lawyer with a master's degree in economics and a doctorate in philosophy, Haddad has been viewed with distrust by the market for fear of uncontrolled spending in a country that already holds high debt from its emerging peers.

He sought to dispel these concerns on Monday, saying the harmonization of fiscal and monetary policy would happen "for sure" and that fiscal and monetary authorities would need to reach an understanding seeking balance.

"We are not here for adventures," he said.

According to Haddad, the government will seek to democratize access to credit and establish a more transparent, "fairer and simpler" tax system.

($1 = 5.3416 reais)