Brazil's incoming Finance Minister Haddad says fiscal expansion won't help at the moment

© Reuters. Brazilian Economy Minister nominee Fernando Haddad speaks during a news conference in Brasilia, Brazil December 13, 2022. REUTERS/Ueslei Marcelino

BRASILIA (Reuters) - Brazil's incoming finance minister Fernando Haddad on Wednesday said fiscal expansion would not help the economy at the moment, downplaying market jitters on an expected spending boost starting next year.

"There are situations that demand countercyclical actions ... but we are not at a moment when fiscal expansion will help the economy," he said in an interview with TV channel GloboNews.

Haddad said the multi-billion spending package backed by leftist President-elect Luiz Inacio Lula da Silva meets campaign promises and fixes budget holes that right-wing incumbent Jair Bolsonaro left for 2023. It still has to be approved by the lower house of Congress after passing the Senate.

Haddad said the only possible stimulus would come from the central bank cutting rates, but that would depend on signaling sustainability for public accounts.

"If we signal that we have restructured public accounts in a sustainable way, it will be possible to bring interest rates" down, he said.

Markets are awaiting the incoming government's presentation of a new fiscal framework that contains an expected dizzying rise in public debt. At his first news conference on Tuesday, Haddad said he would seek to finalize the new fiscal rules as soon as possible, without giving details.

Haddad downplayed possible changes to the country's State-Owned Enterprise Law to make it easier for politicians to take roles at state-run firms, saying effective auditing from the federal government is more important.

"What is needed is a strong controllership," he said.

He said the Brazilian Office of the Comptroller General must be autonomous to fight corruption, but it has lost importance under Bolsonaro.

Brazil's lower house of Congress voted late on Tuesday to change the law, on the same day Lula announced a veteran from his Workers Party, Aloizio Mercadante, as the next head of state development bank BNDES. The bill now heads to the Senate.