After blocking the Budget, Haddad sees evolution of the accounts in relation to the ‘mess’ of 2022

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Minister commented on the freezing of R$2.9 billion, announced by Finance and Planning this Friday. Haddad once again asked for cooperation between the powers to improve public accounts and to overcome ‘a chaotic situation’ left by the previous administration. Government announces blocking of R$2.9 billion from the 2024 budget The Minister of Finance, Fernando Haddad, commented on the blocking of R$2.9 billion in this year’s budget, announced this Friday (22) by the department and the ministry of Planning and Budget. For him, the results are close to what the federal government expected, and the Federal Revenue periodically evaluates the collection results to help decision-making. “Every two months, the Federal Revenue makes an assessment of the revenue that may come in throughout the year, the risks of frustration and assessments of this nature, as was the case with revenue from concessions, which was revised downwards. And it reevaluates the other revenues, ordinary revenues, which, in our understanding, could be underestimated”. “My impression and the impression of the team when sending the Budget was that perhaps current revenues were a little underestimated, and extraordinary revenues a little overestimated. This is proving to be the case, but they are offsetting each other reasonably well”, he said Haddad. The minister stated that it was a good first two months, but that they will continue to reevaluate conditions. Federal government revenue from taxes, contributions and other revenues totaled R$186.5 billion in February this year, the best result in 30 years. In January, it reached R$280.36 billion — also a record. In the first two months of this year, according to official data, federal revenue totaled R$467.2 billion, which represents real growth (above inflation) of 8.8% in relation to the same period last year — when totaled R$431.4 billion (corrected value). “So, we are having a good first two months, but we will continue to follow the evolution of the year with the same rigor. Now, the blockade, it is Planning that will probably offer the allocation to be able to reallocate, to increase Social Security spending , which came in above last year’s projections”, stated the minister. According to the minister, better than expected economic indicators have helped revenue. Asked whether it is possible to maintain the zero deficit target, he said that the result depends on the continued good economic growth, which is currently above expectations, and the creation of vacancies in the formal job market, in addition to the possible approval of fundraising measures. sent by the department to Congress. “That’s what I always say: today, the goal is a law. The result does not just depend on establishing in law what you want. It depends on an effort by the Executive, the Legislative and the Judiciary to balance the accounts.” Haddad reaffirmed that the reorganization of public accounts depends on coordination so that there are no “surprises”. “I understand who is waiting. We are also waiting for the approval of the measures and the evolution of the accounts, it is natural that this is the case. Even more so having emerged from a chaotic situation,” he said. “Only in default of court orders there were 90 and a few billion [de reais] last year. Half of this was not paid in 2022 and half of this was not foreseen in the 2023 Budget, sent by the previous government. It’s not easy to explain to people that we had to pay almost R$100 billion from a default by the previous government,” said Haddad. “All this confusion — which was also reflected in politics, in the coup attempt — all of this is being faced , in the political and economic area, to normalize conditions in the country. It’s normal to charge, the Executive has to be accountable. But, from the mess that was in 2022 to today, I think there has been a fairly consistent evolution”, stated the minister. Block in the Budget The information about the block appears in the primary revenue and expenditure assessment report for the first two months. The limitation will be made in the free spending by ministries, that is, those that are not mandatory. These expenses involve investments and funding of the public machine. Among the costing expenses are: support services, information technology, electricity and water, rental of movable assets, daily allowances and tickets and communications services. Details of which ministries will be affected by the blockade will be released by the end of this month. The blockade is due to the spending limit of the fiscal framework, the new rule for public accounts approved last year. According to the rule: the government also cannot increase expenses above 70% of the growth projected by revenue, and the growth in expenses cannot exceed 2.5% per year in real terms, that is, above the previous year’s inflation. The objective of the fiscal framework is to avoid, in the future, a spike in public debt and a worsening in the interest charged to investors when issuing public bonds. To calculate the need to block the budget, the government made a new estimate of the revenue and expenses that will be made until the end of this year. Understand how the fiscal framework works Zero deficit target The government is also seeking to eliminate the deficit in public accounts this year, a target set out in the Budget Guidelines Law (LDO) — approved by the National Congress and sanctioned by President Luiz Inácio Lula da Silva ( PT). In 2023, the federal government recorded a primary deficit (not counting interest expenses) of R$230.5 billion. It was the second worst result in the historical series. The objective of closing the fiscal hole this year is considered bold by the financial market, which projects a deficit of around R$80 billion for 2024. According to the revenue and expenditure assessment report, however, the government accounts should record a deficit of R$9.3 billion this year. According to the rules of the fiscal framework, there is a band of 0.25 percentage points of GDP above and below the fiscal target. With this, the government can record a deficit of up to R$28.8 billion in 2024 without the objective being missed. In pursuit of the fiscal target, last year the government approved a series of measures to increase federal revenue. The objective is to increase revenue by R$ 168.5 billion in 2024. The measures are: Return of the rule that favors the government in cases of ties in Carf, the collegial body responsible for judging appeals from companies fined by the Federal Revenue – with collection expected R$54.7 billion in 2024. MP that changes the taxation of incentives (subsidies) granted by states on the Tax on Circulation of Goods and Services (ICMS) – with expected revenue of R$35 billion this year. Changes in the interest on equity regime, which consists of a way of distributing the profits of a publicly traded company (which has shares on the stock exchange) to its shareholders; Taxation of “offshore” and so-called exclusive funds; Taxation of the electronic betting market on sports games. According to a calculation by the Independent Fiscal Institution (IFI), a body linked to the Federal Senate, however, the measures to increase revenue will yield around half of what the economic team expected. History The blockade of R$2.9 billion announced by the economic area is greater than that recorded in March last year – in the budget’s first revenue and expenditure report. At that time, no expenditure blocking was announced. At the beginning of last year, the spending ceiling was still in force – whereby expenses could not grow above the previous year’s inflation. The spending cap began in 2017. Before that, budget blocks followed the logic of primary surplus targets – proposed by governments and approved by the National Congress. To achieve them, governments had to block spending – based on forecasts made at the beginning of each year for revenue and expenses. In 2020, at the beginning of the Covid-19 pandemic, the economic team led by minister Paulo Guedes indicated the need, in an official budget report, to block R$37.5 billion. However, with the public calamity decree, approved shortly afterwards, the amount was not limited. And new extraordinary expenses, over R$700 billion, were made.

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