Budget block affects more Cities and Transport – 05/30/2023 – Market

The Ministries of Cities and Transport were the main ones affected by the blockade of R$ 1.7 billion in resources from the 2023 Budget, announced by the Lula government (PT) to offset the growth of mandatory expenses and ensure compliance with fiscal rules.

The decree that formalizes the government’s spending schedule was published on Tuesday night (30), in an extra edition of the Official Gazette.

The act determines a blockade of BRL 691.3 million in the allocation of the Ministry of Cities, responsible for policies such as Minha Casa, Minha Vida, and BRL 602.1 million in Transport.

Social Development (R$ 118.2 million), Regional Development (R$ 96.1 million), Finance (R$ 93.2 million) and Planning and Budget (R$ 88.4 million) were also affected.

Despite the amounts involved, the comparison with the ministries’ current allocation for funding and investments shows that the blockade will consume a small portion of their budgets.

The Ministry of Cities has a space of R$ 16.01 billion for the year, of which 4.32% will be blocked as of the decree. In Transport, of the allocation of R$ 17.65 billion, 3.41% will be blocked. In other bodies, this proportion is between 1.18% and 2.54%.

The size of the blockade in each portfolio was decided at a meeting of the JEO (Budget Execution Board), formed by ministers Rui Costa (Casa Civil), Fernando Haddad (Finance), Simone Tebet (Planning and Budget) and Esther Dweck (Management).

The spending lock affects only so-called discretionary expenses, which include costing and investments, and does not interfere with the payment of mandatory expenses, such as social benefits and salaries.

From the decree, each ministry can choose which actions will have limited spending and which will be preserved.

The blockade was necessary because there was a sharp increase in mandatory expenses in the assessment of the Budget in the 2nd bimester, released on the last 22nd. The government not only had to hold back on discretionary spending, but also worsened its projection for the result of public accounts this year.

The deficit is now estimated at R$136.2 billion, equivalent to -1.3% of GDP (Gross Domestic Product). The value represents a deterioration of R$ 28.6 billion in relation to the forecast released in March, which indicated a negative number of R$ 107.6 billion.

The deterioration in the government’s fiscal framework is mainly due to higher expenditures, although there has also been a reduction in the revenue forecast. One of the main factors behind the increase in spending is the new minimum wage (R$ 1,320), readjusted on May 1st.

Spending had an increase of R$ 24.2 billion compared to the March report, which blew all the slack there was in relation to the spending ceiling, a rule that limits the growth of expenses to inflation. The ceiling is still in force and therefore needs to be complied with by the government – hence the need for blockade.