Treasury Secretary says economic team seeks fiscal deficit of around BRL 50 billion in 2023

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Currently, the official projection is a shortfall of R$ 107.6 billion. The objective of the attempted reduction is to allow public accounts to return to ‘in the black’ in the coming years. The Secretary of the National Treasury, Rogério Ceron, said this Thursday (30th) that the economic team is committed to seeking a fiscal deficit of 0.5% of the Gross Domestic Product (GDP), that is, around R$ 50 billion this year. This means that government expenditures can exceed revenues by that amount – without considering the interest payments on the public debt. This, however, is not yet a formal goal, established by law. “It is a commitment to seek results, because the 2023 target already exists,” Ceron told reporters. Set last year, the primary deficit target this year, according to the Budgetary Guidelines Law (LDO) is up to R$ 228 billion in 2023 for government accounts. For the year 2023, the government’s official forecast, disclosed in the last revenue and expenditure report, is different from that forecast in the LDO: a negative balance of R$ 107.6 billion. The commitment of the economic team represents a new drop. In January of that year, the Minister of Finance, Fernando Haddad, announced a package of measures, focused on increasing revenue, to reduce the deficit to less than R$ 100 billion. For 2024, the Ministry of Finance reaffirmed its commitment to zero the deficit in government accounts. For 2025 and 2026, respectively, it announced that it will seek a primary surplus of 0.5% and 1% of GDP, respectively. Fiscal framework: government announces proposal to replace spending ceiling Fiscal framework To make the strategy of improving public finances viable, in addition to the goals of returning to the primary surplus in the coming years, the government also proposed a limit on expenditures. The proposal, which still has to go through the scrutiny of the National Congress, is that spending cannot grow above 70% of the variation in primary revenue over the last 12 months (until July). And that the expenditure ceiling starts to have a band with real growth in primary expenditure between 0.6% and 2.5% per year, excluding expenditures with Fundeb and with the nursing floor. There will be a floor for spending on investments and spending on health and education will grow again in line with the behavior of net income. According to the government, with the new framework, public debt would rise to a maximum of 77.3% Gross Domestic Product (GDP) in 2026. Last year, the debt amounted to 73.5% of GDP. The relationship between public debt and GDP, however, is not a formal macroeconomic goal of the government. The economic area treats the improvement of this indicator as an objective to be pursued more broadly. Part of the specialists defended that the new framework had a concrete target for the debt. The economic team assesses, however, that this indicator includes variables that are not controlled by the government.

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