No budget margin to reimburse retirees, federal government tends to resort to extraordinary credit, as in the case of flood in 2024
Reparation to retirees and pensioners of the (National Institute of Social Security) that had undue discounts from associations agreed with the Institute will cost up to 16% of the amount of R $ 40.9 billion that the government of (PT) It intended to cover flood expenses in Rio Grande do Sul in 2024.
The CGU (Comptroller General of the Union) that several associations discounted R $ 6.5 billion retirements and pensions from 2019 to 2024. The projection was made from a With retirees and pensioners from April to June 2024, in which 98% of respondents said they were improperly discounted.
With the budget settled, the government must resort to the opening of extraordinary credit to reimburse those who have been injured.
Meetings on the subject in government have been tense. The Plateau wants in the reimbursement process. But there is also fear of society’s reaction to the large values that will leave the public coffers to pay the victims of fraud in the INSS.
There are 3 options on the table:
- recovery of diverted money – It would be the safest option legally. The AGU (General Advocacy of the Union) on Thursday (8.MAI.2025) the blockade of goods of 12 entities investigated by undue discounts. The total amount is R $ 2.56 billion. But these assets can only be used to reimburse the victims after a court decision, something that tends to take. The outcome should be after the 2026 elections. There is fear of the government that the impasse will result in the corrosion of retirees and pensioners to Lula, if he is a candidate for reelection, or whom he supports as a candidate for succession;
- Payment by the Treasury – It would be the fastest option. The government would try to show that the Treasury will be compensated when the court determines the return of the diverted money. Even so, there is fear that this increases the rejection of the government more broadly among tax payers. The opposition will use the idea that there is complacency with the use of public money to cover deviations, which will also be negative in the election campaign;
- hybrid solution – Payment would be made with treasure money only for the most serious cases, from people with lower income and who had higher discounts. It would also have faster decisions of justice in cases of deviations where it is easier to demonstrate the irregularity. This option seeks to have the best of the previous two: speed with resource savings. The risk is to be perceived by society as the combination of the worst in the previous ones: spending public money without getting a fair solution to everyone.
With payments through extraordinary credit, the expense will not be accounted for in the fiscal target. This gives room for the government to expand spending without entering the primary result – which concerns the subtraction of revenues and expenses without considering paying interest on public debt.
In 2025, the fiscal target is zero deficit, but there is a margin of primary deficit tolerance of up to 0.25% of GDP (Gross Domestic Product). In nominal amounts, government accounts can register a negative balance of up to R $ 30.9 billion in 2025.
The opening of extraordinary credit needs validation of the National Congress and is for expenses that were not foreseen. Takes into account the urgency of the situation.
In general, the government edits a provisional measure, which is immediately submitted to Congress for approval or rejection.
Loss of credibility
The advantage of extraordinary credit is to preserve the fiscal target. The disadvantage is to impair the credibility of the goal.
Even if it is outside the limits of the tax framework, the cost To cover the break will be taxpayer. At the same time, the expansion of expenses gives a bad signage to the financial market, which charges the Lula administration effective measures to contain spending and work to stabilize the trajectory of public debt.
A measure By the economic team is the relocation of funds in the budget – to make money from other areas to pay the injured retirees. But values to be relocated from one body to another – in this case, from any ministry to the INSS – must be insufficient to cover the fraud in the INSS if a broad compensation is chosen.
