More than 170 billion reais of spending was excluded from the budgetary framework, according to the IFI | Brazil

This amount could be used outside the expenditure ceiling and/or the calculation of the primary result due to several deductions approved by the National Congress or authorized by the Federal Court (STF). The vast majority were at the request of the federal government itself.

This is the case for part of the expenses linked to court decisions, expenses linked to national defense, temporary expenses linked to education and health, aid to businesses affected by tariffs imposed by the American government, reimbursement of unjustified reductions in benefits from the National Institute of Social Security (INSS) and investments by public companies in the Growth Acceleration Program (PAC).

The IFI recalls that the new budgetary framework entered into force in the second half of 2023 and that the following year, the main results targets announced were lowered.

“Given the extreme rigidity of the Brazilian public budget, the accelerated growth of mandatory spending and the difficulties in producing primary surpluses, expenditures are excluded from the rules, which has contributed to undermining the credibility of the framework and fueling uncertainty about the sustainability of the current tax regime,” say directors Marcus Pestana and Alexandre Andrade.

Added to this is the legal consolidation of the agreement, after authorization from the Federal Court of Auditors (TCU), according to which it is appropriate for the government to pursue the lower tolerance limit of the budgetary target and not the center, which, in practice, represents a further lowering of fiscal targets, public accounts experts warn.

For them, the growing distance between the actual primary result and the official calculated result, added to the permanent change in budgetary rules, has led “the economic actors concerned to abandon the monitoring of budgetary performance indicators established by the framework and to base their analyzes and decisions on the observation of the dynamic of evolution of the public debt/GDP ratio”.

“The data present in the RAF in relation to macroeconomic assumptions unequivocally reveal the unsustainability of the current tax regime and its rules and the inevitability that, sooner or later, the country favors greater budgetary adjustment, guaranteeing the foundations of a sustainable development trajectory combined with budgetary balance” conclude the administrators.