The additional blockade of R$6 billion in the 2024 Budget, announced by the government on Friday night (22), is still insufficient to guarantee full compliance with fiscal rules this year.
With the increase, the total volume of frozen resources rose from R$13.3 billion to R$19.3 billion. However, the Independent Fiscal Institution (IFI), linked to the Federal Senate, points out that cuts of more than R$40 billion would be necessary to meet legal requirements.
The escalation in Social Security spending led the Ministries of Planning and Budget and Finance to forward a revised report to the National Congress, which includes adjustments above the R$5 billion released last Thursday (21) by the Minister of Finance, Fernando Haddad.
On the other hand, according to the IFI, an effort of R$42.3 billion would be necessary in the last two months of 2024 to eliminate the primary deficit — the result of expenses minus revenue, disregarding interest on public debt.
If the government chooses to use the tolerance margin provided for in the fiscal framework, the need for adjustments would drop to R$13.6 billion. This analysis was presented in the Tax Monitoring Report (RAF) of November, published last Thursday (21). Among the measures suggested by the IFI to achieve fiscal goals are a reduction in the execution of parliamentary amendments, an increase in the transfer of dividends and results of state-owned companies, in addition to new expense contingencies.
Payment of amendments can play a decisive role in compliance with tax law
Marcus Pestana, executive director of IFI, believes that the R$13.6 billion can be achieved with greater efficiency through measures provided for in the Budget Law, a higher-than-expected collection, or with compensations created by payroll tax relief. Furthermore, the non-payment of part of the parliamentary amendments authorized for 2024 could contribute.
On Thursday (21), Congress concluded voting on Complementary Bill (PLP) 175/2024, which regulates rules of transparency, execution and impediments to parliamentary amendments. The project, which went to presidential approval, seeks to resolve the impasse regarding individual mandatory amendments, including the so-called Pix amendmentsclassified as special transfer.
These amendments are blocked by a decision by Minister Flávio Dino, of the Federal Supreme Court (STF), who conditioned the release of resources on the definition of stricter rules on traceability, social control, transparency and impediments.
According to the IFI, until October, R$28.4 billion in parliamentary amendments were executed, out of a total of R$45.3 billion authorized for the year. This amount includes outstanding amounts payable from previous years. There remains R$16.9 billion that could still be executed, but is suspended by the STF’s decision. With the fiscal year ending in two months, this block could make it easier to meet the 2024 primary result target.
Risks of tax losses are even greater in the coming years, report warns
The IFI warns that the coming years will present greater difficulties in balancing public accounts. According to the institution, decisions taken during the government transition and in the first year of the current administration significantly increased fiscal challenges. These choices, added to the increase in mandatory expenses, increase the complexity of achieving a sustainable balance in public finances.
