The Government reduces the budget constraint of the ministers from R$15 billion to 13.3 billion According to Reuters

2024-09-21 00:15:38

by Bernardo Caram

BRASILIA (Reuters) – The Planning and Finance Ministries indicated on Friday that the total restriction of the Ministries’ funds to comply with fiscal rules will be reduced from 15 billion reais to 13.3 billion reais, with revenue gains offsetting an increase in mandatory spending.

According to a note from Planning, the bimonthly report of income and expenditure sent to the National Congress this Friday showed that an increase of 2.1 billion reais was needed in the blockade of funds to meet this year’s expenditure limit.

On the other hand, after an increase in income, according to a note from the Planning, 3.8 billion reais will be released that have been contingent until now to ensure compliance with the fiscal target.

The ministry reported that according to the projections of the economic team, the central government will close 2024 with a primary deficit of 28.3 billion reais, a margin of 0.4 billion reais in relation to the lower limit of the zero deficit target.

The fiscal framework gives a concession of 0.25 percentage points of GDP more or less in relation to the target, which means that the government has a margin of 28.8 billion reais to consider the target achieved.

According to the Ministry, the increase in the blockade will be necessary mainly due to an increase in the potential payment of court sentences of small value.

Otherwise, it will be possible to reverse the event due to an increase in income from dividends, exploration of natural resources and concessions, as well as gains from measures approved by Congress to compensate for payroll tax relief in the sectors of the economy and municipalities.

The government will detail the bodies that will be affected by the funding restrictions by the end of September.

The market remains skeptical that the government will meet its fiscal objectives for the year, estimating a primary deficit of 0.60% of GDP in 2024, according to the Central Bank’s latest Focus bulletin. Projections also show a gap of 0.75% of GDP in 2025, when the target is also a zero deficit.