Blocking expenses becomes optional with the new framework

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Government says the change is necessary to avoid interruption of important public policies. The text of the new fiscal framework, delivered by the Planalto Palace this Tuesday (18) to the National Congress, makes it optional for the government to limit (block) expenditures to meet fiscal targets. In the explanatory memorandum for the project, the government says that the change is necessary to avoid interrupting important public policies. The text is signed by the Executive Secretary of the Ministry of Finance, Gabriel Galípolo, and the Minister of Planning and Budget, Simone Tebet. “More important is the change in the contingency logic, which becomes optional, as a way of preventing important policies from being continued due to sometimes occasional revenue frustrations”, write Galípolo and Tebet. Currently, the government needs to block expenditures when it perceives that there is a risk of non-compliance with the expenditure ceiling or the primary result target. Contingencies due to the ceiling have become common in recent years. Contingency is always applied to discretionary expenses, that is, those expenses that are not mandatory. Discretionary expenses include investment, public machine funding and parliamentary amendments. To find out if it needs to block expenses, the government makes an assessment of revenues and expenses every two months, starting in March. It’s called an “income and expense assessment report”. Under the new fiscal framework, this assessment will only need to be done in the months of March, June and September – that is, the frequency has been reduced. “The updated assessment of revenue and expenditure estimates for the purpose of meeting the target will now be carried out at the end of March, June and September, without prejudice to extemporaneous assessments when necessary”, explain Galípolo and Tebet. To change the current rule, in addition to revoking the spending cap, the government will change an article of the Fiscal Responsibility Law (LRF).

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