BRASILIA, Sept 11 (Askume) – Brazil’s central bank said forgotten money held by financial institutions cannot be classified as primary income, dealing a blow to government efforts to recover funds.
In the bill passed by the Senate, which still needs to be approved by the lower house, the allocation of these funds to the treasury was proposed by the leader of the government in the upper house, Senator Jacques Wagner, as one of the compensation measures, in order to compensate for the costly tax breaks for companies in certain regions and smaller cities.
Finance Minister Rogerio Cerón recently estimated that the forgotten amount could be as much as 8 billion reais ($1.42 billion).
In a technical note sent to lawmakers and seen by Askume, the central bank said adding funds to federal government accounts would allow funds to be transferred from the private sector to the public sector without any standard transactions between the two sectors.
The note further says, “Accordingly, the inclusion of these private deposits… should be recorded as an asset adjustment resulting in a reduction in net debt and, all else being equal, a reduction in total debt.” There will be a reduction, but there will be no impact on the balance sheet.
The bill explicitly recommends that the Treasury Department should treat these unclaimed funds “as primary budget revenues for all purposes of calculating fiscal statistics and primary results.”
In the report, the central bank recommended rejecting this part of the proposal altogether, arguing that it would force policymakers to record primary surpluses, which would clearly contradict its statistical methodology.
The fiscal target for this year is zero primary deficit, with a tolerance of 0.25% of gross domestic product (GDP), meaning the government could record a deficit of about 29 billion riyals and still achieve the target.
Central bank procedures are used to verify compliance with the goals.
The central bank noted that the bill also considers other compensatory measures as primary revenue, such as transferring judicial deposits of federal savings banks, public funds and institutions to the Treasury.
(1 USD = 5.6198 R$)
