Government has a deficit of R$234.3 billion, and Haddad fails to fulfill his promise

The primary deficit of the central government — National Treasury, Social Security and Central Bank — was R$234.3 billion in 2023. The result is R$294 billion lower than in 2022, when the government recorded a surplus of R$ $59.7 billion. The data are from Ipea (Institute for Applied Economic Research).

The sharp rise in the primary deficit frustrates a promise made by Finance Minister, Fernando Haddad, at the beginning of his term. “We will not accept a primary result that is not better than the absurd R$220 billion deficit foreseen in the Budget for 2023”, said Haddad in his first speech as minister, on January 2, 2023.

According to Ipea, the main reason for the large deficit was the payment of court orders. Without this, the gap would be R$141.2 billion. Total government expenditure increased by 12.9%.

The primary deficit or surplus is calculated according to the balance between central government revenue and expenditure. Payment of interest on government debt is not included in the calculation.

The deficit was especially high in December – R$119.4 billion – driven by the payment of court orders, according to Ipea. Furthermore, there was also a relevant increase in discretionary expenses – those that are not mandatory, the execution of which is subject to the manager’s assessment. The government spent R$14.7 billion on discretionary expenses in December 2023, an increase of 64.3% compared to the same month in 2022.

Total government revenue in 2023 recorded a real decrease (adjusted for inflation) of R$72.3 billion (-2.9%) compared to 2022. The fall was mainly driven by revenue from concessions and permissions, which had drop of R$40.8 billion (-82.2%).