2024 fiscal target may be revised after Lula’s speech, says Budget rapporteur

Representative Danilo Forte (União-CE), rapporteur of the Budget Guidelines Law (LDO) of 2024, said this Tuesday (31) that the fiscal target of zero deficit for next year can be revised in the Budget discussion. The possibility was raised after President Luiz Inácio Lula da Silva (PT) cast doubt on the achievement of the target, which put Finance Minister Fernando Haddad on the defensive on Monday (30) denying that there was a “disengagement” with the public Accounts.

Forte met with Minister Alexandre Padilha, of Institutional Relations, on Monday night (30), and said that he is “totally” open to reviewing the zero deficit target in 2021.

“The government is still waiting for the definition, this possibility, whether it will change or not [a meta]. They have not yet said whether they will send the amending message. That’s why I think they need to speed up,” he said in an interview with Estadão.

Danilo Forte seeks to vote on the LDO’s preliminary opinion this week, which will open the deadline for the presentation of amendments. According to the Constitution, the President of the Republic can modify the LDO “while the vote in the Mixed Budget Committee (CMO) has not started”, which involves deputies and senators. Centrão leaders are also pushing for the vote.

The LDO was sent to Congress on April 15th and should have been voted on by the end of the first.

The possibility of a more flexible fiscal target pleases party leaders, who fear that the government will need to significantly block spending at the beginning of 2024, impacting the release of parliamentary amendments. Deputies and senators have these resources to apply to electoral bases in municipal election years.

Danilo Forte has also discussed ways to increase the obligation to pay for amendments and establish a calendar for the release of these resources, with the aim of reducing dependence on the Executive.

Lula’s statement that the government will have difficulty meeting the fiscal target established by its own economic team generated uncertainty in issues related to revenue, such as that affecting the taxation of large companies. This put Finance Minister Fernando Haddad in a delicate position.

The Provisional Measure for the subsidy, one of the main items on Haddad’s fundraising agenda, is at risk. This measure, sent by the government to Congress in August, regulates a decision by the Superior Court of Justice (STJ) and restricts the possibility of large companies reducing incentives granted by states in the calculation basis of federal taxes, which reduces the Union’s revenue.

Although the MP has been converted into a bill, the government seeks to return to the MP’s original format, with the aim of guaranteeing an additional R$9 billion in public coffers in 2024. This is because tax increases need to follow rules and deadlines, and approval via MP would allow the new rates to come into force from January of next year.