07/22/2024 – 16:24
The Planning and Finance Ministries confirmed the need to contain R$15 billion in ministry funds to bring the central government’s primary deficit projection in 2024 to R$28.8 billion, exactly the lower limit of the tolerance margin for the zero deficit target.
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The bimonthly revenue and expenditure report shows that it will be necessary to block R$11.2 billion in funds to bring federal spending within the limit allowed by the fiscal framework, which is a real increase of 2.5% for the year. As a result, the government would close 2024 with a deficit of R$32.6 billion, equivalent to 0.3% of the Gross Domestic Product (GDP).
As the fiscal framework provides a tolerance margin of 0.25 percentage points of GDP, either more or less, in relation to the target, which corresponds to R$28.8 billion, the government will still need to make a contingency of R$3.8 billion.
Amid questions from analysts about the government’s commitment to the sustainability of public accounts, which increased volatility in the Brazilian market, the Finance Minister, Fernando Haddad, brought forward the announcement that would only be made this Monday by making public last Thursday, the 18th, the decision to freeze R$15 billion in this year’s Budget.
In practice, the two measures announced on Monday imply cuts in the resources available for spending by the ministries. The official announcement of the affected departments will be published by the end of this month.
According to official calculations, the government’s net revenue, which excludes transfers to states and municipalities, should be R$13.2 billion below the level estimated in May, at R$2.168 trillion.
Regarding total expenses, the government forecasts an increase of R$20.7 billion compared to the May estimate, reaching R$2.230 trillion.
“Whenever you need”
Earlier on Monday, President Luiz Inácio Lula da Silva said the government will freeze budget spending whenever necessary and said it has the issue of fiscal responsibility “deep in its bones.”
“Whenever we need to block, we will block,” said Lula in an interview with journalists from international agencies at the Palácio da Alvorada.
The president was asked if he could make new budgetary blocks, in addition to the R$15 billion announced last Friday, the 19th. Since then, there have been comments about the need to increase this number.
He recalled that this was not the first budget cut made by the government and stressed that if it spends more than it collects, the country “will go bankrupt”. At the same time, he considered that the budget management going forward will depend on the behavior of revenues.
“The same money you need to cut now, you may not need to cut in two months, it depends on the collection,” he said.
The president showed irritation with the questions made to the government about its fiscal responsibility and the demand for more cuts, at the same time as they ask for the exemption of payroll taxes.
“People who are happy with the blocking of money and projects are happy with the tax relief. Which will cost 27 billion (reais). It would be better not to have the tax relief, which would not need to block anything,” he complained.
According to the president, the Federal Court of Auditors carried out an analysis and discovered that “tax relief is worth nothing, other than increasing profits”.
“When you reduce taxes, you are only favoring the business side. It doesn’t guarantee more jobs, it doesn’t guarantee stability,” he said.
The government tried to overturn the payroll tax exemption for 17 sectors, but Congress approved its maintenance. A decision by the Supreme Court determined that lawmakers must then find compensation for this tax break. The government and the Senate are trying to reach an agreement on the measure.
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