Concerned about ‘snowball’, government will defend in the STF the overthrow of sections of the PEC dos Precatório

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The request came from the Ministry of Finance, which forwarded an opinion to the Attorney General’s Office (AGU). Government defends that STF judge the proposal unconstitutional and order immediate payment of debts. The federal government decided, this Monday (25), to defend in the Federal Supreme Court (STF) the overturning of sections of the so-called “PEC dos Precatório”. The decision was taken by the Ministry of Finance, which forwarded an opinion to the Attorney General’s Office (AGU). ✅Click here to follow the new g1 channel on WhatsApp. The ministry asked the STF to judge the main provisions of the measure as unconstitutional and order the immediate payment of all debts already issued. To do this, the government wants to classify the principal – that is, the value of the debt – as a primary expense. In public accounts, “primary expenditure” refers to all government expenditures that are not related to the payment of interest on public debt. In other words, they are, for example, the expenses that the government carries out to maintain essential public services, such as health, education, security. Interest on the principal value of court orders should be classified as a financial expense. In other words, they would be outside the primary result target and the expenditure limits that the government must meet. This makes a difference to whether or not the government reaches spending targets each year. Tebet says he believes in a zero deficit target Extraordinary credit The payment of inventories would be made possible with the opening of extraordinary credit — opened by provisional measure for unforeseen and urgent expenses. The accumulated values ​​of court orders will total R$95 billion in 2024, according to government estimates. The proposal is that the STF allows the payment of this amount through extraordinary credit — also outside the limits of the new tax rule. “The proposed solution aims to solve the problem and will not open up the expansion of fiscal space of any kind”, stated the Ministry of Finance in a note. Zero deficit This way, the department would be able to meet the primary result target for 2024. Next year, the government intends to present a zero deficit – when expenses are equal to revenue and there is no additional spending. The government also requests approval from the STF to maintain the segregation of expenses as primary and financial for new issuances of court orders. In this way, the principal value would continue to be classified as a primary expense and the interest as financial. According to the ministry, differentiation between expenses would increase transparency and help “defuse a ‘time bomb’ in public accounts”. PEC dos Precatório Approved at the end of 2021, the “PEC dos Precatório” is a constitutional amendment that limited the payment of court orders to a ceiling — legal expenses that the government can no longer appeal. The text set, until 2026, a limit for the payment of federal court orders. However, the amounts retained must accumulate to be paid in 2027. According to the government, the amount could reach R$250 billion, “which will make the solution to the problem practically impossible.” In practice, the PEC dos Precatório generates an accumulation of debts over the years in which there will be a payment limit. The debts will only be fully executed from 2027 — when the limits become invalid. Currently, in 2023, the accumulated value of court orders totals R$65 billion. The limit for payment of court orders this year is R$17.1 billion, according to information from the Federal Audit Court (TCU).

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