Understand what will change in the 2026 budget

The LDO sets the parameters of the budget law, indicating how the executive will spend and how much it should spend in the coming year. The 2026 budget bill is expected to be approved by the 17th.

The calendar of amendments, which the Legislature has championed in the face of frustration with the pace of enactment in 2025, represents a setback for Planalto in the dispute over control of budget implementation in an election year.

However, the government relented to pursue the bottom of the fiscal target tolerance band rather than the centre. In a ruling this week, the Federal Court of Audit (TCU) highlighted the risks, but allowed the measure as long as it was provided for in the LDO. In practice, Congress has given greater impetus to spending in the year in which President Lula is expected to seek re-election.

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The fiscal target for 2026 is to achieve a surplus of 0.25% of GDP, allowing for a variance between 0% and 0.5% of GDP. With permission to pursue the floor, the government receives a margin estimated at approximately R$34 billion.

In addition to the changes negotiated in the fiscal sphere, the government also reached an agreement with Congress to allow spending of up to R$10 billion by Correos to be excluded from the fiscal target for non-state-owned enterprises. The target value set for 2026 is R$6.75 billion.

The state-owned company is negotiating a loan worth 20 billion Brazilian reais with a group of banks, but the Treasury has refused to provide guarantees given the high cost of the process.

In the case of amendments, in addition to the commitment to pay 65% ​​of what was expected in individual modalities and seats, the device was included in the LDO after pressure from parliamentarians given the pace that was considered slow this year. By November, 36% of this year’s expected amount had been effectively implemented. If only the committee’s amendments were considered, this percentage would be 9%.

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As O GLOBO has shown, to deliver this volume in the first half of next year, the government will need to double the pace of issuing amendments compared to recent election years.

In 2024, before the municipal elections, the pace of release was slower. As of June, the government had paid only 27% of the R$33 billion tax adjustments. This includes individual amendments, to which all representatives and senators are entitled, and bench amendments, which are divided equally among members of Congress from each state.

“Budget hijacking”

The 2026 LDO text, introduced by Rep. Gervasio Maia (PSB-PB), also shortens deadlines for naming parliamentarians to benefit from amendments, lengthens analysis time by ministries, redefines red tape for technical impediments and establishes rules for replacing parliamentarians who write amendments.

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Before the vote in Congress, Lula criticized the size of the mandatory amendments to the federal budget, which are estimated at about 40 billion Brazilian reais next year.

– I honestly do not agree. I don’t agree with mandatory amendments. “I think the fact that the National Congress expropriated 50% of the Union budget is a serious historical mistake,” the President said.

When asked about the statement, the President of the Senate, Davi Alcolombre (União-AP), avoided refuting the Workers’ Party member and praised the agreement reached with Planalto.

— The LDO has been collaborative, with all actors involved. I think it was very good, and we are moving forward very well with the vote on the Brazilian budget this year,” said the head of the legislature.

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The Congress-approved LDO also included a provision that allows the government to donate goods, values, and benefits even during an electoral period, as long as the donation is a “fee” to the beneficiary—that is, some minimal consideration from the municipality or entity receiving the resource, such as providing land, bearing a nominal cost or signing an operational commitment.

This makes the “electoral defense” device more flexible, which traditionally prohibits this type of transfer in the three months before the vote.

In practice, the article allows for the distribution of basic food baskets, equipment and other goods financed directly by the executive authority or through parliamentary amendments. This measure circumvents the logic of the electoral law by releasing packages during the election campaign.

Furthermore, the LDO text stipulates that the party fund will be adjusted according to the rules of the fiscal framework, based on the 2016 value. In practice, the fund now has an automatic updating mechanism, with real growth of up to 2.5% per year, plus inflationary replacement.

The text’s rapporteur, MP Gervasio Maia (PSB-PB), said the impact could reach R$200 million. He took a position against the change in the text.

– In a country where we need more street infrastructure, more affordable housing, and many other things, increasing the party fund by R$150 million to R$200 million is ridiculous. I did not accept the report and voted against the highlights of what was presented — said the parliamentarian.

The government’s leader in Congress, Randolph Rodriguez (PT-AP), said after the approval that Lula could veto the device.

– The government has reserved for itself the hearing of the request in the Mixed Budget Committee, and has reserved itself to work towards approving the text, but the government reserves the right to evaluate a possible veto on this issue (increasing the party fund) – he said.

It is expected to raise R$14 billion with the import tax increase

To close the accounts for 2026, the draft Annual Budget Law (PLOA) began to include additional revenues of R$14 billion resulting from the increase in revenue projections from the import tax. The government’s expectations take into account the increase in the tax rate on some products, the impact of commercial decisions taken throughout 2025, in addition to the increase in imports next year.

The increase in the import tax is determined by the Executive Management Committee of the Chamber of Foreign Trade (Gecex-Camex), a collective body of ministries, and does not depend on congressional approval, which represents a relief for the economic team in the midst of the crisis between the powers. Part of the expected price increases for 2026 is already under analysis in the technical group.

The new projections for revenues from the import tax were included by Senator Professor Durinha (União-TO), PLOA’s revenue rapporteur, in her opinion, on Wednesday. The report was approved by the Joint Budget Committee.

Durinha stated in her text that the increase of R$14 billion was due to the government’s implementation of trade defense measures requested by the national productive sector, which would provide better “competitive conditions.”

However, federal government interlocutors admit that the expectation of additional revenue from the import tax was necessary to close next year’s budget, which aims to achieve a surplus of R$34.3 billion, or 0.25% of GDP.

The exit through the import tax was due to frustration with initiatives to raise revenues, as was the case with the tax on financial operations themselves. After the negative reaction, the government was forced to partially withdraw the tax increase.

After negotiations with Congress, he proposed a Provisional Measure (MP) as an alternative, but it ended after the opposition acted in the Assembly. Finally, the government was able to recover restrictions on undue tax offsets in another project, as it struggles to achieve victory in the taxation of betting and financial technology, a proposal that has already been approved in the Senate.

The balance between losses and new expectations of gains amounted to an increase of R$12.3 billion in total revenues in 2026, compared to August, when the business plan was sent. In net revenues, after transfer to states and municipalities, the gains amount to R$13.2 billion.