The federal government will fail to meet the fiscal targets set for 2026, 2027 and 2028 if new measures to reinforce revenue are not approved by the National Congress. The warning was made by the National Treasury in a Fiscal Projections report released this Monday (16).
For 2025, the body assesses that the fiscal target – of zero deficit, with a tolerance of 0.25 pp of GDP – will be achieved even if R$46.7 billion in revenues conditioned on project approval are not achieved. But, to reach the center of the target, the government would need an extra R$17.9 billion – or 0.1% of GDP.
The projection of non-compliance with the targets from 2026 to 2028 considers the ‘Initial Scenario’ outlined by the Treasury.
In it, the Ministry of Finance body only incorporates R$ 121.5 billion next year from so-called extraordinary revenues, which include collections from the Fiscal Resources Administration Council (Carf) and the transaction programs of the Attorney General’s Office of the National Treasury (PGFN) and Revenue, in addition to the Special Control of Tax Benefits measure.
In other words, these are initiatives that do not depend on Congress and would have a permanent effect of R$62 billion for the remaining years.
The estimates, in turn, disregard the conditional revenue package that requires Congressional approval. These are the compensation for payroll tax relief and the project that changes the CSLL and JCP rates. For 2025, this group would increase government revenue by R$46.7 billion.
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These numbers are only incorporated into the ‘Reference Scenario’, which envisages meeting the targets for every year until 2028.
Even with this more comfortable “initial” scenario for next year, the Treasury argued that it is “prudent” to carry out all the planned fundraising efforts because any eventual frustration in the R$121.5 billion package may not be fully covered by a contingency.
“In the interest of prudence, the projection indicates that it would not be advisable to save efforts to approve the conditional revenues in Congress, especially the biggest one: compensation for the partial exemption from the payroll”, warned the body.
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Furthermore, regarding 2025, the Treasury pointed out that the budget bill already predicted an excess in the primary result of R$29 billion. However, with the new parameters, the agency estimates an excess in revenue of R$28.8 billion, or 0.2% of GDP.
“It is worth repeating that the break is welcome, given the uncertainties inherent in the approval of conditional revenues, as well as the effectiveness of extraordinary revenues, which depend, to a large extent, on the interest of taxpayers in negotiating their tax debts”, he stated.
Next years
For 2026, 2027 and 2028, whose targets for the primary are 0.25%, 0.5% and 1% of GDP, respectively, an additional collection effort of 0.7%, 0.8% and 1% would be necessary of GDP for the center of fiscal targets to be achieved.
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Although highlighting the need for revenue, the Treasury considered that the fiscal effort could be achieved through a combination of several measures – such as spending review, reducing the links between expenses and revenue, pooling and contingency.
“In fact, as projected for the initial scenario, the contingency could contribute 0.3 pp of GDP to the fiscal effort necessary to meet the primary result targets,” wrote the agency, which did not consider the effects of the fiscal package sent in November for your projections.
“From 2026 to 2028, the prospect is that it will not be possible to meet fiscal targets in the absence of new revenue measures. A deficit of 0.5% of GDP is projected in 2026, 0.1 pp below the lower limit of the band, adjusted for exceptions. In 2027, net revenues exceed primary expenses, showing a primary surplus of 0.1% of GDP and, for 2028, a surplus of 0.5% of GDP is projected, both below the lower limit of the band”, listed the Treasury.
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If the government fails to meet these targets, the economic team will be forced to adopt the triggers provided for in the new fiscal framework. For example, if you fail to meet the target in 2026 and 2027, the expense limit could only increase in 2028 and 2029 at a rate of 50% of the increase in revenue – instead of 70% of the original rule. Furthermore, the fiscal framework provides that, if non-compliance occurs for two consecutive years, additional triggers are activated, such as the prohibition of salary increases in public service.
In the latest Fiscal Projections report, released in March by the government, the Treasury pointed out that without additional measures the government would no longer be able to meet the primary result target in 2025.
Mandatory expenses are expected to grow
The Treasury also estimates that mandatory expenses that are subject to limitation should have an average real growth of 3.0% per year in the period between 2024 and 2034. This evolution is influenced by the growing expenses with the INSS, the Continuous Payment Benefit ( BPC), court orders and expenses linked to health and education minimums.
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This progress does not consider the expense containment package to adapt to the fiscal framework presented by the government at the end of November and which is being processed in Congress.
The projection indicates that the growth in mandatory spending is greater than the limit allowed by the fiscal framework (which limits the increase in expenses to 2.5% in real), which will compress discretionary expenses in the period.
“This reduction in fiscal space for discretionary expenses suggests that the adoption of new public policies will depend on a review of expenses that takes into account an assessment of priorities and the costs and benefits of current policies, such as the package of measures proposed by the Government Federal in November 2024, the effects of which were not considered in the projections of this report”, says the document.
The main government expense, Social Security will have a slight increase in total expenses between 2024 and 2025, reaching 8.2% of GDP, due to the anticipation of payment of court orders in 2023 and 2024. Between 2025 and 2034, social security expenses will assume a downward trajectory and will reach the end of this period at 79%.
The Treasury’s estimate is an average annual real growth of 36% per year for expenses under the General Social Security Regime (RGPS) between 2024 and 2034. There are three factors that contribute to this dynamic: the increase in the benefit, which is linked the minimum wage; cooling of the effects of the 2019 Social Security reform and the aging of the population; in addition to the acceleration in financial compensations between the RGPS and other social security systems.
In the case of BPC, the proportion of this expenditure in relation to GDP will increase from 1% in 2024 to 1.2% in 2034, reflecting the increase in beneficiaries due to the aging of the population and the indexation to the minimum wage.
“In real terms, BPC expenditure grows from R$111.8 billion in 2024 to R$195.5 billion in 2034 in constant 2024 values, which represents an average annual real growth of around 5.7% for the period analyzed, a growth rate much higher than that of other expenses”, says the document.
Other expenses show a stable trajectory in relation to GDP in the period, such as bonuses and unemployment insurance, which will remain at the level of 0.7% of GDP between 2024 and 2034. The same occurs with court sentences and court orders, which remain at 0 .3% of GDP, and the Union supplementation for Fundef/Fundeb, estimated at 0.4%, with small marginal variation throughout the decade.
On the other hand, there is a forecast of a reduction in personnel and Bolsa Família expenses. In the case of personnel expenses, after reaching a peak of 3.3% of GDP in 2025, a downward trajectory begins, which culminates at a level of 2.5% of GDP in 2034. “We emphasize, however, that the evolution of this This item will be defined by the personnel policy to be adopted in the future, both in terms of hiring new employees and granting salary adjustments”, says the document.
Bolsa Família should increase from 1.5% of GDP in 2024 to 0.9% of GDP in 2034. This will occur if the number of benefiting families is maintained (20.9 million from 2025) and considering an adjustment of the benefit average, estimated at R$ 682 87, based on inflation from the previous year every two years, starting in 2025.
Other mandatory expenses go from 2.5% of GDP in 2024 to 1.8% of GDP in 2034. This scenario puts pressure on free expenses.
“Discretionary expenses, in turn, projected as a residue between the expense limit and the mandatory expenses subject to it, present a real negative average variation of 9.7% per year between 2024 and 2034. This reduction occurs notably from 2027 onwards. , when the payment of all expenses with court rulings and court orders is once again subject to the expense limit. As a consequence of these factors, the volume of discretionary expenses falls from 1.7% of GDP in 2024 to 0.4% of GDP in 2034”, points out the Treasury
