Government announces new budget blockage and reduces budget deficit forecast to R$141.4 billion in 2023

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The blocking of R$600 million will be detailed, in its division by ministries, only at the end of this month. The economic team’s previous expectation was of a larger fiscal deficit this year, of R$145.4 billion. The Ministries of Planning and Budget and Finance announced this Friday (22) that it will be necessary to block an additional R$600 million in this year’s budget. The information is contained in the income and expenditure report of the budget for the fourth two months. The report is released every two months. This so-called “contingency” is necessary to meet the existing spending limit for 2023 – approved at the end of last year through the so-called transition PEC and confirmed in the fiscal framework (the new rule for public accounts). This is the third spending block in 2023, which will be added to the other two previously announced. In May, the government had already made a contingency of R$1.7 billion and, in July, another limitation of R$1.5 billion was announced. As a result, the total amount of blocked expenses in the 2023 budget rose to R$3.8 billion. Government promises to eliminate deficit in the 2024 budget with new revenues. Details of which ministries will have their funds limited will only be released at the end of this month. Contingent expenses involve investments and funding from the public sector. Break in government accounts in 2023 The Ministries of Finance and Planning also reduced, in the report released this Friday (22), the forecast for a break in government accounts this year. The expectation of the economic area is that the so-called primary deficit will remain at R$141.4 billion in 2023, against the previous projection, made in July, of a negative result of R$145.4 billion. The government was authorized by Congress to have a hole of up to R$238 billion this year. The primary deficit occurs when expenditure exceeds revenue and does not take into account expenditure on interest on public debt. When revenues are higher, the result is a surplus. Fiscal framework and budget for 2024 The forecast for this year’s fiscal hole once again exposes the government’s difficulty in achieving zero fiscal deficit in 2024 – a target that appears in next year’s budget. To achieve this result, the government reported that it seeks an increase in revenue of R$168 billion next year, through measures such as changes to Carf, taxation of exclusive funds and the end of the interest on equity mechanism. This goal is included in the fiscal framework, the new rule for public accounts, which also includes greater space for expenses in 2024, freeing up resources for ministries. Even so, analysts estimate that there may still be a compression of so-called “free spending” by ministries, with an impact on public policies, over the next few years. Because of this, they recommend that the government review expenses, something that will also be important, in the economists’ view, to try to achieve the goal of zero fiscal deficit next year.

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