The economic team will make official, on Monday (22), the freezing of R$15 billion in the 2024 Budget. It will be included in the Income and Expense Assessment Report, to be sent to the National Congress. This report is seen as a test of the economic team’s commitment to the target for public accounts and the search for fiscal balance.
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Budget Cuts
At the beginning of the month, Haddad said that the expenditure contingency in the 2024 Budget will be the size necessary to comply with the rules of the fiscal framework. This is the instrument used to contain spending when the fiscal target is at risk due to frustrated revenues.
Interview with President Lula
President Lula (PT) said on Tuesday (16/07) in an interview with Rede Record that he is not obliged to meet the fiscal target if he has “more important things to do.” On the other hand, he stated that the zero-deficit target for this year has not been rejected and committed to doing what is necessary to comply with the fiscal framework.
No Blocks in Social Programs
The Minister of Planning, Simone Tebet, ruled out interrupting social programs and works under the Growth Acceleration Program (PAC) that had already started, mainly in the areas of health and education. Tebet admitted that the government must cut spending but stated that this must be done with “unnecessary” spending. The statement came at a time when the government was discussing budget blockages to balance public accounts.
Fiscal Target
A new block of funds in this year’s Budget, now in July, will be inevitable to meet the fiscal target of eliminating the public deficit. The Minister of Finance, Fernando Haddad, announced a blockade of R$11.2 billion in the 2024 Budget. In addition, he also announced a contingency of R$3.8 billion.
Minister Haddad said that the details will be done on Monday (22/07) afternoon but added that this value does not consider the review of social benefits and Social Security that the government is still going to carry out.
Blocking versus Contingency
Blocking refers to amounts in the Budget that have to be blocked for the government to maintain the fiscal framework’s spending target. While contingency is a containment made because government revenue is coming in lower than expected. Unlike the lockdown, the contingency is easier to reverse throughout the year, if revenues return to forecasts.
Social Benefits Review
To avoid an even greater impact, the Executive decided to bring forward some spending reduction measures. Among them, is the review of the Social Security and Continuous Payment Benefit (BPC) databases to combat irregularities and deviations. Palácio do Planalto believes that this could reduce the costs of social programs by at least R$10 billion this year.
Cuts for 2025
On 3 July, Finance Minister Fernando Haddad announced a cut for 2025 of R$25.9 billion in expenses with social benefits, which will go through a review.
Analysis:
Finance Minister Fernando Haddad’s recent statement regarding potential budget blocking and contingency measures underscores the government’s dedication to maintaining fiscal balance. This commitment is crucial for stabilizing public accounts and preventing further depreciation of the Brazilian real against the dollar.
The proposed budget cuts demonstrate the administration’s strategy to adhere to the fiscal framework amid challenging economic conditions. These measures are aimed at ensuring the fiscal target is met, reflecting a pragmatic approach to fiscal management. The government recognizes the necessity of cutting expenditures to align with revenue constraints while maintaining essential services.
Additionally, the review of social benefits is designed to eliminate irregularities, ensuring a more efficient allocation of resources without compromising crucial programs. By advancing these measures, the government seeks to reinforce its fiscal credibility, which is vital for maintaining economic confidence and curbing inflationary pressures.
The delicate balance between austerity and investment in essential services will be pivotal in achieving sustainable economic growth and social progress.
Sources: G1 [1], [2]; A Folha de SP [1], [2]; O Globo [1], [2]; Agência Brasil.
