Government considers cutting almost R$ 5 billion in expenses to meet the spending ceiling
- July 23, 2022
- No Comment
The size of the cut should only be defined next Friday when the new bimonthly report evaluating budget expenditures and revenues is sent to Congress.
Even with the continuation of the collection process, the government will be forced to cut and cancel expenses again on the eve of elections for the fulfillment of spending ceilingthe rule that limits the growth of expenses to the variation of inflation.
Initial calculations point to a need for an effective cut of around R$5 billion, according to Estadão. But the value of the contingency may fall to a level closer to R$ 3 billion with adjustments within the Budget itself.
The size of the cut should only be defined next Friday when the new bimonthly report evaluating budget expenditures and revenues is sent to Congress. In this report, the government is obliged to correct deviations that may imply non-compliance with the ceiling or the primary result target. The announcement should only take place on Monday of next week.
As there is an excess of collection, the problem this year is on the side of the spending ceiling, which remains very tight, despite the flexibility with the changes made by Congress to postpone part of the payment of precatories (debts that the Union is obliged to pay after court rulings). There was also no readjustment of 5% in the salaries of civil servants, not even for police careers, despite President Jair Bolsonaro’s promise to the category.
New expenses have appeared, however, since the last bimonthly report in May, among them, the overthrow by Congress of the presidential veto of the Paulo Gustavo Law, which determines the transfer of R$ 3.86 billion from the National Cultural Fund (FNC) to promote of cultural activities and products due to the economic and social effects of the covid-19 pandemic. The law is a tribute to the actor and comedian who died a victim of covid-19.
A higher expenditure forecast of Social Security benefits may also enter the account. In addition, Congress prohibited the government from blocking resources from the National Fund for Scientific and Technological Development (FNDCT). In total, R$ 2 5 billion that were contingent on the fund will need to be unblocked.
These new expenses may force the government to block parliamentary amendments. If they were preserved, the additional cut will require more tightening of the ministries. The Ministry of Defense, which had a blockade of R$ 706 million in the last report, collects resources to fund the operations of the three forces: Army, Navy and Air Force.
The problem is greater in the Navy, where inspections and job training cycles on two frigates, a corvette and an underwater rescue ship have been canceled. Tests of the Mansup long-range anti-ship missile were also postponed. Three operations defined as “of strategic value”, according to an official, are off the agenda, will not be carried out. The final tests of the new S-40 submarine, Riachuelo, and the presence in large regional naval maneuvers, such as Unitas, of transcontinental scope, are maintained.
The Federal Police has also been complaining about the lack of funds and saying that operations will have to be stopped.
On June 6, the Ministry of Economy announced the need for a greater budget block, of R$ 8.7 billion. The initial blockade had been BRL 8.24 billion, at the time of the announcement of the second Budget report, at the end of May, but the government expanded the cut to restore the Ministry of Economy’s budget for assistance by BRL 463 million. emergency expenses (system maintenance, payment of bank fees for the provision of services)
The effective block, in practice, was R$ 6.96 billion, because the existing reserve of R$ 1.74 billion was used to restructure the careers of federal police, federal highway and prison guards. As this measure did not happen, there will be no need to replenish this reserve.
In the first report, the government had blocked R$ 1.72 billion, in amendments by the rapporteur, the RP9, of the so-called secret budget, revealed by Estadão. Throughout July, the government accelerated the effort of these amendments to vote on the Proposal for a Constitutional Amendment that increases social assistance in an election year, the so-called PEC Kamikaze. A part, however, was reserved for after the October elections for negotiations aimed at electing the presidencies of the Chamber and Senate, already in a scenario of definition of the next government.