Public accounts have a deficit of R$230.5 billion in Lula’s first year – 01/29/2024 – Market

In the first year of the government of Luiz Inácio Lula da Silva (PT), the central government’s accounts had a deficit of R$230.5 billion in 2023, equivalent to 2.12% of GDP (Gross Domestic Product). This is the worst result since 2020, the year of the Covid-19 pandemic.

The result was influenced by the regularization of court orders, judicial debts that had been postponed by the administration of Jair Bolsonaro (PL). At the end of last year, the Lula government obtained authorization from the STF (Supreme Federal Court) to settle liabilities of R$93.1 billion.

Even without the payment of court orders, the deficit would have been R$138.1 billion — equivalent to 1.27% of GDP.

In this comparison, only Dilma Rousseff’s (PT) second term had a worse result in the first year of her administration. In 2015, the loss was R$183.1 billion due to the regularization of so-called tax cycles. In 2019, the first year of the Bolsonaro administration, the deficit was R$122.6 billion. The values ​​were updated for inflation.

The 2023 result was worse than the target set by Minister Fernando Haddad (Finance), who promised to deliver a deficit of up to 1% of GDP in the first year of the administration.

Even before Lula’s inauguration, the government acted in the National Congress to approve a PEC (proposed amendment to the Constitution) that authorized the increase of up to R$168 billion in spending in 2023 to restore Budget actions that were strangled by cuts of up to 95%.

The increase in spending triggered a worsening of expectations regarding the fiscal trajectory. The economic team even launched, in January, measures to restore revenues for 2023, but much of it did not yield what was expected or was dehydrated after long negotiations with Congress. Federal revenue had a real drop of 0.12% last year, already discounted for inflation.

The deficit indicates that the government spent more than it collected last year. The data released this Monday (29) aggregates statistics from the National Treasury, Central Bank and INSS (National Social Security Institute).

For the official assessment of compliance with the fiscal target, the STF authorized the government to deduct the costs of regularizing court orders.

On the other hand, the fiscal result will still worsen by an additional R$26 billion, referring to the recovery of amounts abandoned in the PIS/Pasep Fund accounts.

The BC, the body responsible for official public finance statistics, does not consider the fund’s resources as primary revenue — a different methodology from that adopted by the National Treasury. Therefore, the gap to be announced by the BC will be even greater.

Even so, the LDO (Budget Guidelines Law) authorizes a deficit of up to R$213.6 billion, which corresponds to 2% of GDP. Therefore, the numbers should not indicate a formal breach of the rule.

In his inauguration speech, in January 2023, Haddad said that he would not accept a result “that is not better than the absurd R$220 billion deficit foreseen in the Budget”.

From then on, the Treasury set an informal target of 1% of GDP — which in March reached 0.5%, an even more ambitious objective, but which was soon abandoned.