States and municipalities may become more indebted in 2023 – 08/24/2023 – Market

The CMN (National Monetary Council) decided this Thursday (24) to increase by R$ 12 billion the limit for states and municipalities to contract new credit operations still in 2023 —which provides a 75% increase in the current limit, which is of R$ 16 billion and is already sold out.

The measure means that governors and mayors will be able to have access to new money in the next four months. The measure takes effect from September 1. Of this amount, R$ 9 billion may have the Union as guarantor, while another R$ 3 billion will be operations without a guarantee from the federal government in case of default.

The decision comes at a time when the government of Luiz Inácio Lula da Silva (PT) is putting together a series of measures to facilitate the access of these entities to sources of financing.

A month ago, the Ministry of Finance announced changes in the rules for assessing the financial health of states and municipalities, summarized in a note known as Capag (payment capacity).

“The orientation towards expanding the volume of operations guaranteed by the Union was motivated by the significantly lower cost of these operations for subnational entities, as well as by the new guarantee instruments for Public Private Partnerships (PPPs) offered by the National Treasury”, says the Treasury. in note.

The CMN is made up of ministers Fernando Haddad (Finance), Simone Tebet (Planning and Budget) and the president of the Central Bank, Roberto Campos Neto.

Before the expansion, the CMN had stipulated a limit of R$ 6 billion for the granting of credit operations guaranteed by the Union and R$ 10 billion for unsecured financing. The limits are already exhausted.

According to the government, the expansion of limits “is in line with the primary result projections for subnational entities” provided for in the LDO (Budget Guidelines Law) of 2023.