Government announces blocking of R$2.9 billion in the 2024 Budget

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The measure aims to comply with spending limits set out in the fiscal framework, the new rule for public accounts. Economic team estimates that government accounts will have a deficit of R$9.3 billion in 2024. The Ministries of Finance and Planning and Budget announced this Friday (22) the blocking of R$2.9 billion in this year’s budget . The information is contained in the primary income and expenditure assessment report for the first two months. The limitation will be made on free spending by ministries, that is, those that are not mandatory. These expenses involve investments and funding of the public sector. Costing expenses include: 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 blockage 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 projected growth in revenue. and spending growth 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. Asked whether the zero deficit target is illustrative, the deputy secretary of the National Treasury, Viviane Varga, simply stated that balancing public accounts is very important for the economic team. “We are very close to balance, the volume of revenue is very close to the expenditure limit”, declared Varga, explaining that this gives sustainability to the public debt. 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. This Friday, the economic team projected an inflow of R$168.3 billion in extraordinary revenue this year with these measures. According to a calculation by the Independent Fiscal Institution (IFI), a body linked to the Federal Senate, however, the actions to increase revenue will yield around half of what the economic team expected. The measures are: Return of the rule that favors the government in cases of a tie in Carf, the collegial body responsible for judging appeals from companies fined by the Federal Revenue – with expected revenue of R$54.7 billion in 2024. MP that changes taxation of incentives (subsidies) granted by states on the Tax on the 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. 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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