Government sees pressured accounts and difficulty to reduce deficit of R$ 65 billion in 2023

Despite projecting a result in the blue for this year’s public accounts, the government must submit a Budget proposal for 2023 to Congress by the end of the month, with a balance again in the red and a deficit slightly smaller than the R$ 65 billion authorized by the Law. of Budget Guidelines.

The evaluation of members of the economic team heard by the Sheet is that the impacts with Auxílio Brasil, the readjustment of civil servants, the correction of the Income Tax table and fuel subsidies are today the four main challenges on the table to close the accounts for the first year of the next presidential term.

In a scenario considered conservative, Guedes’ team sees a surplus of BRL 6 billion this year for the central government, the first after eight years of failure (and the second in a row for the consolidated public sector, which also considers states and municipalities). . The 2022 framework was made possible with the help of extraordinary income.

In addition to the above-expected recovery in federal revenue (driven by inflation and soaring oil prices), dividends requested by the government from BNDES (R$ 18.9 billion) and funds from the privatization of Eletrobras (R $26.8 billion) — but there are still all dividends to be collected in the second half, including those boosted by the Executive’s request.

The government projects a return to the deficit in 2023 even with the uncertainty on how to accommodate the four challenges in the Budget. Although the measures are disregarded in the accounts, other factors weigh on the federal accounts, such as the natural growth of mandatory expenses.

If these measures are included in the budget in any way, they would still depend on legal changes to be made feasible. According to technicians, it is possible to include in the Budget proposal some indications that the values ​​can be modified later.

In an interview this week, President Jair Bolsonaro (PL) stated that the budget text will provide an “indicative to maintain the R$ 600 [do Auxílio Brasil]”. Currently, the program rules provide for the payment of R$ 600 only in 2022 – and, as of January, the payment drops to R$ 400.

This, combined with the entry of another 2.2 million families, makes the total demand for resources for the program rise from R$89 billion in 2022 to R$158 billion next year – according to calculations used by technicians.

Readjustment to servers should increase tightness in public coffers in 2023

The readjustment for servers should also consume fiscal space. The government plans to grant an increase corresponding to projected inflation for next year. The market currently estimates a rate of 5.33% for 2023 (which could require BRL 16 billion for the measure), but the government has calculated a percentage of around 4% (an approximate cost of BRL 12 billion).

Expenses like these take up space in the spending ceiling, which has reduced the room for maneuver for so-called discretionary expenses (the non-compulsory ones, where the investments are). In the 12 months ending in June, discretionary execution was BRL 155 billion (less than 10% of the total) – and the figure is expected to be even lower in 2023.

The eventual update of the Income Tax table and a possible continuity of the fuel subsidy policy in 2023 do not consume space in the spending ceiling (as they are measured on the revenue side), but affect the primary result.

The update of the Income Tax table was promised in recent days by Bolsonaro for next year, after he did the same during the 2018 campaign.

Despite this, the issue is still not a consensus within the government. For the plan to go ahead, a set of counterparts is seen as necessary – such as, for example, the limitation of deductions for medical expenses.

The government has also not given up on the idea of ​​taxing dividends, which can serve as a source of revenue for the Auxílio Brasil of R$600 starting next year (although the problem does not solve the headache of the ceiling).

While it closes the accounts for 2023, the Ministry of Economy shows increasing optimism with the accounts for 2022. The possibility of a “pooling” of R$ 16 billion of spending until December helps in the account. These are expenses that, although released, end up not being carried out due to bureaucratic issues.

This factor, added to a plausible increase in dividends after a government request and extra gains from tax and social security collections, may allow the surplus of R$ 6 billion to be overcome.

On the other hand, the government is under pressure to unlock resources for parliamentary amendments and for spending by the ministries. This year, R$ 12.7 billion have already been blocked. An eventual release of funds would reduce the positive balance in the 2022 accounts.

Despite the return to the deficit next year, government technicians estimate that the trajectory of recent years shows the country in a gradual fiscal rebalancing after the series of negative results since 2014. According to the official forecasts of the Ministry of Economy, a return to the result positive after the 2022 blue would only be observed in 2025.