Government has a surplus of BRL 28 billion in October, third largest for the month

The central government (which includes the National Treasury, Social Security and Central Bank) registered a surplus of R$ 28.1 billion in October, the third largest in history for the month (considering data updated by inflation). The result represents a reversal of the deficit of BRL 3.4 billion registered a year earlier and is released as a new variant of the coronavirus raises concerns about a possible new wave of Covid-19 and the need to use more public resources to mitigate the crisis.

The result for October came in above the median expectations of the Prisma Fiscal survey, by the Ministry of Economy, which indicated a surplus of R$ 10.1 billion for the month.

According to the Treasury, the result was influenced both by the evolution of collections and by the better targeting of expenses related to the Covid-19 crisis. Last year, the country was facing the first year of the pandemic and the government was implementing measures with a stronger fiscal impact – such as increased emergency aid and broader tax deferrals.

There was a real increase compared to a year earlier of 5.9% in net revenue (to R$ 156.1 billion) and a real decrease of 15.4% in total expenditure (to R$ 127.9 billion).

From January to October 2021, there was a deficit of R$ 55.4 billion, corrected for inflation. The number represents a real drop of 92.8% compared to the three-digit gap for the same period in 2020 (BRL 680.8 billion), but it is still the sixth worst result for the period in the historical series (started in 1997 ).

Paulo Valle, secretary of the Treasury, says that it is still too early to talk about the risks of the new variant and that the economic team depends on assessments by the Ministry of Health on the need to act. He was asked how the government will face an eventual new wave and whether the strategy would include so-called extraordinary spending (outside the traditional Budget and therefore the spending ceiling).

In response, he defended the PEC (proposed amendment to the Constitution) of the Precatório —which was approved in the Chamber and is now in the Senate— as an instrument to make room for more spending, including for Covid. But it did not rule out the use of extraordinary credits depending on the severity of the pandemic.

“As for the new wave of the strain in South Africa, it is still too early and we depend on the evaluation of the Ministry of Health, which will update us on the need to act,” he said. “But, at first, I would like to draw attention to the fact that we are working hard on the approval of the PEC, which opens up a very significant space for implementing the Brazil Aid,” he said.

“At first, our strategy is focused on approving the PEC, which will give us a margin of maneuver even if there is a worsening in this scenario. For now, we are not working with any other alternative. But this will depend on the severity or not of this second wave” , he stated.

Valle reaffirmed the economic team’s position that the government’s strategy to face the expenses demanded for Brazil Aid in 2022 continues to be the approval of the PEC dos Precatórios. “We do not work with plan B. We work with the approval of the PEC, we believe in its approval and do not work with any other hypothesis,” he said.

The Treasury also released this Monday (29) new projections for public indebtedness in the coming years. According to the numbers, the accounts will only return to blue in 2024.

A few months ago, internal projections by the economic team signaled a possible return to the surplus in 2023. Minister Paulo Guedes (Economy) had been claiming that the accounts could return to positive territory in 2023 or 2024.

However, the prospect of more expenses — including because of the changes arising from the PEC dos Precatório — extended the prospect of numbers in the red.