Authorities blocks one other BRL 5.7 billion and will increase danger of blackout in public companies in 2022
Centrão parliamentarians articulate a project to try to free up space within the spending ceiling and relieve organs
The Jair Bolsonaro (PL) government announced a new blockade of BRL 5.7 billion in the 2022 Budget to avoid breaking the spending ceiling. The measure could impose a blackout in the public machine just over a month before the end of the current president’s term – like the issue of passports, already suspended by the Federal Police due to lack of funds.
The spending ceiling is the rule that limits the growth of expenses to inflation variation. Although there is a consensus among economists on the need to change it, it is still in force and needs to be complied with in the execution of the Budget. Therefore, blocking resources is mandatory for the government.
The lock will leave a balance of only R$ 3.6 billion for the entire federal government to go through the month of December. The amount does not include expenses such as wages and social benefits, since they are mandatory.
“It will be very difficult, very tight. The government has never been so tight, it’s normal to be flexible [os bloqueios no Orçamento]”, said the special secretary of Treasury and Budget, Esteves Colnago. Despite the critical situation, he assessed that the government will be able to reach the end of the year with the most immediate needs up to date. “We will attend to all the policies that are important,” he said, without naming which ones.
According to Colnago, the new spending block will focus almost entirely on discretionary spending by ministries, which cover operating costs, purchase of materials or investments. The parliamentary amendments that were still available are now all blocked —there is actually a growing pressure for the release of these resources.
As shown to Sheetparliamentarians from the centrão articulate the approval of a bill to change the LDO (Budget Guidelines Law) and include a series of devices that make the way in which the spending ceiling is measured more flexible.
The practical effect of the changes would be to avoid the new lock and still release resources that were already locked since before. The government is also interested in the measure to avoid a collapse of its activities.
It is not ruled out yet to include some device in the PEC (proposed amendment to the Constitution) of the Transition, sponsored by the team of the president-elect, Luiz Inácio Lula da Silva (PT), to allow the expansion of expenses at the end of this year to rescue the most committed. The joint was revealed by Sheet🇧🇷 The assessment is that the bill alone may not be enough to alleviate the pressure on the Budget.
In September, the total amount blocked in the Budget had reached R$10.5 billion, of which R$7.9 billion in rapporteur amendments (an instrument used as a bargaining chip in political negotiations with Congress) and R$2.6 billion in ministry expenses. A small part was released, but the tightening situation prevailed again.
If the new BRL 5.7 billion block needs to be implemented by the economic team, the total block will reach BRL 15.4 billion, leaving few resources for the public machine to continue running in the last month of 2022. The situation is assessed as critical, and other services may experience downtime.
Today, the spending ceiling needs to be respected in two moments: in the inclusion of expenses in the Budget and in the effective financial disbursement to pay for the actions. The bill being discussed in Congress seeks to make the first requirement more flexible, allowing the forecast of expenses that will only be settled in the next fiscal year without the need to cancel expenses from other bodies.
In practice, the amount that will actually be paid in 2023 would not need to be accounted for in this year’s ceiling, and the space left by this can be used for other expenses.
Technicians speak of ‘creative interpretations’ of the ceiling
Experienced technicians heard under reservation assess that the proposal seeks to “inaugurate creative interpretations” about the operation of the spending cap, or simply circumvent the limit. In the technical area of the TCU (Tribunal de Contas da União), the preliminary assessment is that the initiative is unconstitutional, as it changes the functioning of the expenditure limit —which is provided for in the Constitution itself.
The bill originally only changed the deadline for opening new credits in the Budget. The report with the changes is by Deputy AJ Albuquerque (PP-CE), co-religionist of the President of the Chamber, Arthur Lira (PP-AL), and the Minister of the Civil House, Ciro Nogueira. The report was unable to contact the parliamentarian.
One of the excerpts from the opinion deducts from the spending ceiling adjustments related to primary expenses that are committed at the end of a year, but only have a financial impact at the beginning of the following year — as with the payroll of civil servants and Social Security.
Commitment is the first phase of spending, when the government assumes the commitment to make that payment. In the case of wages and benefits, commitment is made in December, but part of the disbursement only occurs in January, according to the payroll schedule.
The opinion also allows for accounting in the Budget only the effective transfer forecast referring to the Paulo Gustavo law to encourage culture. Bolsonaro even edited an MP (provisional measure) to postpone the expenditure of BRL 3.8 billion, but the STF (Federal Supreme Court) decided that the measure is unconstitutional – forcing the government to include the expense in the budget forecast for the year.
“The expense of the ‘Paulo Gustavo Law’, after opening the credit, will not be fully implemented until the end of the year. Given the financial nature of verifying the expenditure ceiling, it is necessary to incorporate the effective payment projection until the end of the fiscal year, so that the ceiling space is not compromised with these expenses”, says the project opinion.
According to Colnago, the project would release a space of R$ 3.8 billion if approved, referring to the Paulo Gustavo Law. But he said that there is still no consensus position within the government on whether or not to support the measure, as it promotes other broader changes.
Technicians from the Ministry of Economy also assess that the flexibility of the ceiling provided by the proposal is limited, since the fiscal rule is provided for in the Constitution. “There is a poorly written wording in the Constitution, which mixes budget and finance. The project seeks to make a better separation, but we have a lock that is constitutional, it says what should compute in the ceiling
Regarding the reassessment of the Budget, in addition to the inclusion of expenses with the Paulo Gustavo Law, the government needed to incorporate an additional forecast of R$ 2.3 billion in expenses with Social Security.
As shown to Sheet, the faster reduction of the INSS (National Social Security Institute) queue puts pressure on the Budget, since it increases the volume of benefits to be paid by the federal government. The possibility of a new increase in the final stretch of the year had already been alerted by technicians.
Despite the tightening situation on the expenditure side, the Ministry of Economy is projecting an even more favorable scenario for tax collection. The primary surplus estimate rose from R$ 13.5 billion in September to R$ 23.4 billion in the assessment made now.
By the end of the year, the agency predicts an even more noticeable improvement. The perspective is that the central government accounts —which bring together the National Treasury, Social Security and Central Bank— will have a positive result of R$ 38.7 billion. If confirmed, it will be the first surplus since 2013.
The government also revised its revenue estimate for 2023, the first year of Lula’s new term. The Budget project was sent in August with a deficit forecast of R$ 63.5 billion. Now, the gap has been reduced to R$40.4 billion, although it still remains in negative territory.
According to the Economy, the revision stems from an increase of R$ 23.1 billion in expected revenues from taxes and dividends from state-owned companies.
In an unusual participation in the release of the Budget reassessment, the Minister of Economy, Paulo Guedes, said that the improvement in the accounts is the result of the policies adopted in his administration. “How can someone serious and prepared talk about cursed inheritance?”, He questioned.
According to him, the fiscal framework for 2023 currently has a “small deficit” that, if the new Lula government “wants to transform it into a surplus”, could be reversed by cutting tax exemptions. “The situation is relatively simple for those who are prepared or for those who want to speak the truth,” said Guedes.
The 2023 Budget provides for R$ 80 billion in exemptions, including the zero rate of federal taxes on gasoline and diesel. The measure was adopted by Bolsonaro this year and was not reversed by the current government, which included the measure in next year’s forecast.