BRASILIA, Sept 20 (Askume) – Brazil’s government late on Friday slightly revised its forecast primary deficit for the current fiscal year, citing higher revenues that would more than offset the need for a freeze on new spending to ensure compliance with spending limits.
In its bimonthly revenue and expenditure report, the Ministry of Planning and Finance lowered its 2024 primary deficit forecast to 28.3 billion reais ($5.13 billion).
The figure is still within this year’s zero deficit fiscal target, which allows for a shortfall of up to 28.8 billion riyals, allowing for 0.25 percentage points of GDP in either direction.
In the July report , the deficit was more precisely estimated at 28.8 billion reais, taking into account the impact of the need to curb expenditure totaling 15 billion reais, the ministries said at the time.
Now, the amount needed to curb spending has fallen to 13.3 billion riyals, he said.
This is partly due to the reversal of a previously frozen 3.8 billion reais, which was halted two months ago due to low revenue expectations.
The government has now raised its revenue forecast, largely due to the implementation of recently enacted legislation aimed at offsetting costly payroll tax breaks and expectations of bigger dividends.
At the same time, the government announced it would need to curb an additional 2.1 billion riyals in spending this year to meet existing budget rules limiting spending increases.
Under the new fiscal framework approved by President Luiz Inacio Lula da Silva last year, spending can grow only 2.5% above inflation in 2024.
In practice, this means that when mandatory spending estimates rise, the government must cut other spending to stay within limits.
The planning and finance ministries said the new measures were necessary to compensate for increases in social security forecasts for this year, which many economists said the government had underestimated.
(1 USD = 5.5143 R$)
