If the federal government continues to adopt the same posture it has today for the budget, public debt is expected to burst in the coming years.
Gross General Government Debt (DBGG) – which comprises the Federal Executive, the National Institute of Social Security (INSS) and state and municipal governments – or R $ 9.2 trillion, in April 2025, up 0.3 percentage point of GDP compared to March.
The expectation of the Lula administration, presented in April in the Budgetary Guidelines Bill (PLDO) to 2026, is that DBGG closes this year by 78.5%, reaches a peak of 84.2% in 2028 and then falls.
Although, . The Senate Independent Tax Institution (IFI), for example, sees DBGG in 81.4% of GDP by 2025 and reaching 95.3% by 2028. From 2030 ,.
To contain debt growth, the government must first balance its spending and revenues. And to make it back, you must reach the primary surplus – that is, spend less than they collect.
What is argued is that public account management is not being effective enough to reap the positive result and make it consistent. Economists heard by CNN indicate which ways could lead to tax relief.
Control of mandatory expenses
“Inevitably, to have tax relief must have control of mandatory expenses. So the government does not reach any place of definitive fiscal adjustment,” says José Ronaldo de Castro Souza Jr., chief economist at Leme Consultores and professor at the Brazilian Capital Market Institute (IBMEC).
The mandatory expenses are those linked to social benefits, public wages and spending whose rules are defined by the Constitution, such as education and health.
Today, they occupy just over 90% of the whole spending provided for in the federal budget. From 2029, according to the government itself ,.
The forecast is this because these expenses grow at a higher pace than allowed for complete government spending, which follow the rule of – established by the Lula government itself to dictate public accounts.
The new rule, which replaced the spending ceiling, limits the growth of the 70% expense of the previous year’s revenue variation.
“The PLDO 2026 does not have relevant tax adjustment measures to contain the growth of mandatory expenses, expand revenues or revise strict allocations. This option, combined with the deterioration of tax indicators, signals. Debt stabilization projections do not seem plausible to us,” IFI said in May after the presentation of the PLDO.
By decreasing the mandatory expense, the economists heard by the CNN They emphasize that the government would make the budget more flexible and make room for investments. To rethink them, they suggest:
- Carry out a new pension reform: Today, social security benefits represent 46.8% of mandatory expenses, being the only group that exceeds R $ 1 trillion, and the tendency is for this expense to continue to grow due to the aging of the population;
- Review the minimum constitutional expenses with health and education: Linked to revenue growth, they press the limit of the tax frame. GESNER OLIVEIRA, a partner of GO Associados and professor at the Getulio Vargas Foundation (FGV), recognizes the delicacy that the subject has, especially for the population, but evaluates that the debate could be conducted with “a very transparent speech to ensure that this would guarantee increased investments” in the country;
- Rethink the calculation of the minimum wage: Today, the minimum wage has real gain – above inflation – linked to GDP growth. José Ronaldo suggests that there is a freezing in the actual growth of the minimum, correcting it only for inflation. Another point is:
- Deindex benefits of the minimum value: With a series of payments whose amounts operate in a logic of equivalence to the minimum wage, every R $ 1 increase in the salary floor generates impact of R $ 400 million on public accounts, according to Warren Investimentos estimates;
- Control the growth of the Fund for the Maintenance and Development of Basic Education and the Appreciation of Education Professionals (FUNDEB).
Moreover, as a regulatory adequacy, Oliveira proposes that a fine mesh in the Single Registry (Cadúnico) – the Federal Government’s registration for vulnerable people and used to assign benefits – not in order to cut social programs, but to make them paid to those who really need it.
One of the examples that the partner of GO highlights is the continued benefit (BPC): – Aid dedicated to the elderly and people with disabilities whose family income is a quarter of the minimum wage by family member – in 31 straight months of expansion, and 1.6 million people were added to the program.
“It is delicate for the election year, but it is necessary a comb in the continued benefit benefit, it is not possible that it has increased so much,” ponders the economist.
Subsidies review
Oliveira highlights data indicating that there was a resignation of around R $ 580 billion in 2024, a result that should come in this line this year.
José Ronaldo endorses the review, given that many of these tax benefits may no longer make sense. “There is A long-term imbalance and no measure has been discussed to contain, “says Leme’s chief economist.
Gesner Oliveira argues that “A strict review of subsidies is necessary “, but also recognizes at this point the political delicacy of the subject, due to the strength of the sectors that benefit from these regimes.” I need a lot of courage, You have to cut something and keep others. “
Administrative reform
Another point raised is the need for an administrative reform of the public sector. In the words of the Ministry of Management and Innovation in Public Services, the idea is to modernize, “transform public administration and achieve high productivity rates, offering quality services to citizens at a lower cost.”
The changes would be valid for all entities of the Federation – Union, States, Federal District and Municipalities – and servants of the three powers – Executive, Legislative and Judiciary.
The President of the Chamber of Deputies, Hugo Motta (Republicans-PB) ,. To the WG, Motta also attributed the function of.
“Administrative reform does not have a short term result, but has an interesting expectation effect in the medium term. Looking at the government’s expense and revenue projections over the next 5 or 10 years can improve,” says Oliveira.
New tax rule
Economists recognize, however, that as the most difficult electoral year is approaching, delicate measures like these are discussed.
Considering the evolution of expenses and the wear and tear of the new tax framework, they evaluate that, for the next management, it will be necessary to propose another new rule.
“We will need a new tax rule and structural changes, a tax ‘package’ with the legitimacy of a government starting. Either you do it, or you die,” emphasizes the FGV professor.
“What would be cool, and has already been suggested, is already preparing a program, along with a coalition for the next government to implement it. A new transition PEC, but for good,” he concludes.
