Government proposes amendment to 2024 Budget guidelines to try to preserve up to BRL 40 billion in expenses

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Text is similar to the amendment approved by the Senate in the new tax rule. LDO rapporteur, deputy Danilo Forte, said that inclusion of conditional expenses in the Budget depends on the vote on the framework in the Chamber. Tebet: Government draws up the 2024 Budget with an additional R$ 30 billion from the fiscal milestone The government sent this Monday (7) to the National Congress a proposal to modify the Budgetary Guidelines Bill (PLDO). The change authorizes the Executive to include conditioned expenses in the 2024 Budget proposal. With this, the economic team could preserve up to R$ 40 billion in expenses when preparing next year’s Budget — which needs to be sent to Congress by August 31 ( understand more below). LDO (Budget Guidelines Law): as the name implies, the text brings the guidelines for the preparation of the Budget for the next year; LOA (Annual Budget Law): it is the Budget itself, with the revenue estimate and the expenditure schedule for the year. The objective of the proposal sent by the government is similar to that of an amendment approved by the Senate during the vote on the new fiscal rule, in June. The fiscal framework had already been approved by the Chamber in May. As the proposal was changed by the senators, there is a need for a new round of voting in the House. On the occasion, the deputies will be able to overturn the amendments made by the Senate, including the amendment that allows the inclusion of conditional expenses in the 2024 Budget. Deputy Danilo Forte (União-CE), rapporteur for the 2024 Budget Guidelines Law, must Tuesday (8) a preliminary opinion on the proposal, at a meeting of the Joint Budget Committee (CMO). It will be up to the rapporteur to decide whether to include or reject the proposal forwarded this Monday by the government. To TV Globo, Danilo Forte said that he will only analyze the change after the vote on the framework in the Chamber of Deputies. That is, the decision on whether or not to include the amendment proposed today by the federal government in the PLDO 2024 depends on the decision of deputies to maintain or not the amendment approved by the Senate (which deals with the same topic) in the text of the new fiscal rule. READ MORE: Government prepares Budget for 2024 with an additional R$ 30 billion from the fiscal framework, says Tebet Haddad says he believes that the fiscal rule will be approved by the Chamber in the coming weeks Conditional expenses The new fiscal rule foresees that federal expenses will be corrected annually by inflation accumulated in 12 months until June. According to the text approved by the Chamber during the first vote, if this accumulated inflation in the 12 months until June is different from the inflation verified at the end of the year (January to December), the government could correct the amount of expenses through the opening of credit, with Congressional endorsement. However, this could only happen in 2024, when the closed inflation for 2023 is released. An amendment to the text of the framework, suggested by the government’s leadership in Congress and approved by the Senate, allows the government to design, already in the budget bill — sent by August 31 —, the value of expenditures based also on July inflation to December. The change could make room for growth of up to R$40 billion in expenses for next year. This is because the expectation is that the inflation registered at the end of 2023 should be at a higher level than that found in the 12 months until June. The government’s economic team assesses that the inclusion of conditional expenses in the Budget makes the budget piece more realistic and transparent. New fiscal rule In general terms, the new fiscal rule foresees that expenses can grow above inflation, but respecting a fixed range of real growth: between 0.6% and 2.5%. In addition, spending growth is limited to 70% of government revenue growth. For example: if revenue rises by 2%, expenditure may increase by up to 1.4%. If approved, the proposal will replace the spending cap, in force since 2017, which limits the growth of most government expenditures to the previous year’s inflation.

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