Health and Education are the main affected by blockages in the Budget in 2022

The Ministries of Health and Education are the most affected by the blockage of resources in the Budget this year. The contingency was made so as not to disrespect the spending cap rule, which prevents federal spending from growing beyond inflation.

This month, the government concluded that there was a need for a new contingency after the publication of the bimonthly report of revenues and expenses, which pointed to growth in mandatory expenses – which, because of the ceiling, requires a reduction in discretionary expenses (those on which the government has freedom of decision and may stop executing).

The new blockade is made just over two months before the elections and increases the limitation of the public machine in the midst of the race for the Planalto Palace. On the other hand, the government has already obtained authorization from Congress to release R$ 41.2 billion outside the fiscal rules (including off the ceiling) in order to boost social benefits on the eve of the campaign.

According to the Ministry of Economy, the total need for blocking in 2022 rose by R$2.7 billion from two months ago and the current one (to R$12.7 billion). As a result, BRL 2.7 billion is blocked in the Health portfolio, and BRL 1.6 billion in Education (the other ministries have blocks below BRL 382 million).

President Jair Bolsonaro (PL) this month complained about the need for a blockade. “It’s hard to work with a budget like that, in a cast,” he said.

“When something arrives that goes beyond what was expected, I have to cut it. Where are you going to cut it? If it cuts education, it complains. If it cuts health, it complains”, said the president. “Everyone will have a complaint, it’s natural. I’m obliged to comply with the legislation”.

The need for blocking indicated in the bimonthly report of income and expenses is a requirement of the legislation. The Fiscal Responsibility Law (LRF) determines that, if it is verified, at the end of a two-month period, that the revenue may not support the fulfillment of the results goals of the public accounts for the year, the government must limit the commitment and financial transactions.

However, this year’s blocks are not being made to meet the fiscal target, but the limit set after the creation of the constitutional norm of the spending ceiling.

The slack in the fiscal target is felt this year because revenues are expanding, giving the government peace of mind with the result stipulated in the Budget Guidelines Law of 2022 (primary deficit of up to BRL 170.4 billion). In the meantime, the ceiling remains fixed and limiting expenses.

Atypical revenues, such as those from the privatization of Eletrobras and dividends boosted after a government request, in addition to the precatories maneuver (which reduced the need for payments this year), also help in the 2022 account.