Government reduces forecast of fiscal gap in 2021 from BRL 139.4 billion to BRL 95.8 billion

The Ministry of Economy revised the revenue and expenditure projections for this year and, for the first time, started to forecast a loss of less than R$ 100 billion for the federal accounts at the end of 2021.

According to the folder’s new calculations, released this Monday (22), the government should end the year with a primary deficit of R$ 95.8 billion. The previous estimate, made in September, pointed to a breach of R$ 139.4 billion.

The reduction in expenses planned for the year should open a margin of R$ 6 billion for new expenses still in 2021. This will allow the release of resources for ministries, not yet detailed by the government.

According to the folder, the result is the result of an improvement in the collection, driven by the recovery of activity after the most acute period of the coronavirus pandemic.

On the revenue side, the government estimates an increase of R$ 57.7 billion in collection, compared to the previous projection. This forecast contains increases in tax revenues administered by the Federal Revenue (R$ 21.8 billion), social security contributions (R$ 7.3 billion) and exploration of natural resources (R$ 6 billion). There is also a forecast of a gain of R$ 17.7 billion with dividends.

In expenses, the government now foresees a reduction of R$ 4 billion in expenses, compared to the estimate two months ago. There is a drop, for example, in allowances and unemployment insurance (R$1.6 billion less), payroll (R$201 million less) and subsidies (R$192 million less).

The expense account was not even smaller because the government authorized the release of R$ 1.4 billion for the purchase of vaccines against Covid-19.

“It is a consolidation of information that shows that the fiscal results are moving towards consolidation. The fiscal accounts are within the expected trajectory”, said the secretary of the Treasury and Budget, Esteves Colnago.

The economic team predicts a reduction in the government’s gross debt indicator from 88.8% of GDP (Gross Domestic Product) in 2020 to 81.7% by the end of this year.

The scenario, according to the folder, may change if Congress approves the PEC (Proposed Amendment to the Constitution) which limits spending on court orders — government debt recognized by the courts and without the possibility of appeal. The measure also promotes a change in the formula for calculating the spending ceiling, which limits the growth of federal spending to the variation in inflation.

The proposal should open up a space of R$ 106 billion in the 2022 accounts, which will allow the expansion of expenses with Brazil Aid and parliamentary amendments — resources for projects and works indicated by deputies and senators.

With the forecast of more expenses, the Ministry of Economy states that the gross debt could end 2022 at 81.7% of GDP if the PEC is approved, against the current forecast of 80.5%.

In an interview with the press, Colnago said that the government has been studying ways of compensation for making a definitive Brazilian Aid viable, but he stressed that there is still no defined source. Without this support, the government presented the new benefit in the amount of R$ 400, but on a temporary basis, until the end of 2022.

“What we technically lack for the program to be permanent is a permanent source. Today, we don’t have a source for this expense to be permanent,” he said.

The Budget Guidelines Law requires the presentation of compensation for the social program to be definitively implemented. The secretary stated that the folder is against changing this requirement.

The idea of ​​making the program permanent has been gaining traction, but senators have not yet detailed how the plan would be implemented.

According to Colnago, if Congress approved the Income Tax reform, there would be a compensation basis for an average benefit of approximately R$300. Therefore, it would still be necessary to find other sources to reach the level of R$400.

Among the possibilities is the cut in tax incentives. However, both the reform of the Income Tax and the reduction of subsidies are in the process of being stalled and with no forecast for voting.