Government blocks R$3 billion from the Budget and predicts deficit in target

The government of Luiz Inácio Lula da Silva (PT) announced this Friday (22) that it will block R$2.9 billion in funding and financing resources for ministries to avoid exceeding the expenditure limit foreseen by the fiscal framework.

The data was presented within the Primary Revenue and Expenses Assessment Report for the 1st two months of 2024.

The blocked amount is smaller than initially expected, between R$5 billion and R$15 billion. The reduction was possible thanks to the review of benefits from the National Social Security Institute (INSS), which according to the government could generate savings of R$10.9 billion.

The government understood that there was no need for contingencies – which, in budgetary jargon, is different from “blockade”.

The primary expenditure deficit that the government projects for this year, according to the report, is R$9.3 billion (0.1% of GDP), within the target’s tolerance margin. The official objective is zero deficit, but the framework allows for a variation of 0.25 percentage points in the Gross Domestic Product (GDP) up or down.

In practice, blocking and contingency result in resources being unavailable to ministries. But there is a technical difference. The blockage concerns the lack of available credit, when there is an overflow in the expenditure item. This was the scenario, of an increase in mandatory expenses. The option, therefore, was to block discretionary expenses, such as funding and investments.

Contingency is used when the primary result target is at risk due to loss of revenue. It is related to the commitment limit, when there is a lack of revenue to close the accounts. It wasn’t the case. The increase in revenue in the first two months of the year allowed the release of this first report without the need for contingencies.

In January, thanks to the approval by the National Congress of measures to increase revenue, such as the taxation of exclusive funds, the sum of taxes at the federal level totaled R$280.6 billion, a real increase of 6.67% in relation to January 2023. February data, released on Thursday (21) by the Federal Revenue of Brazil (RFB) showed a collection of R$ 186.522 billion, a real gain of 12.27%, compared to February 2023, in numbers corrected by IPCA.

The strategy now is to use this breath to postpone or even eliminate any possible debate on easing the fiscal target.

Review and “fine comb” reduced expenses

Without a review of INSS spending, the necessary blockade would be in the highest range of initial projections, close to R$15 billion. The savings of R$10 billion this year with the review of beneficiary spending had already been announced at the beginning of the year by the president of the National Social Security Institute (INSS), Alessandro Stefanuto. A group of technicians prepared a technical note to support the projection, as required by the Federal Audit Court (TCU), which usually analyzes the assumptions used in the estimates in detail.

The “surgical” review will focus on suspected irregularities or fraud relating to sickness benefits, the Continuous Payment Benefit (BPC) and closed insurance, aimed at artisanal fishermen. As a result, benefit expenses should rise from the current R$879.9 billion to around R$891 billion. Without the review, INSS spending would be around R$902 billion.

The process will begin with the BPC, through a balance to determine the benefits considered “consolidated”, such as those intended for dependents with autism, which will be exempt from review. From May onwards, the remaining beneficiaries will be called for medical examination and proof of family income, in order to identify possible accumulation of benefits or undue income.

The sickness benefit check will come next, scheduled for July, aimed at beneficiaries who have received the benefit for more than a year. To combat fraud in closed insurance, the government plans to use state and municipal databases.

A portion of the amount saved by the “fine-toothed” operation will be allocated to investments in technology to combat fraud. One of them is the expansion of Atestmed, a system that receives online medical certificates for sickness benefit requests, eliminating the need for an in-person examination.

Using Artificial Intelligence, the tool cross-references and analyzes beneficiary data to detect irregularities and falsifications. With the expansion of Atestmed alone, the savings should be more than R$5.5 billion. The agility of the tool allows payment of the benefit for the period strictly necessary. The average duration of aid granted via Atestmed is between 60 and 70 days, compared to 300 days for a benefit that must await an in-person examination.