Use of extra income for investment can raise spending outside the ceiling to BRL 198 billion

The proposal to use non-recurring revenues to fund investments outside the spending ceiling could raise the bill for the Transition PEC (Proposed Amendment to the Constitution) to R$198 billion in 2023.

The possibility of allocating this portion of the collection to the financing of investments, up to the limit of 2% of the RCL (net current revenue), was announced on Thursday night (10) by the rapporteur of the 2023 Budget, Senator Marcelo Castro (MDB). -PI), after a meeting on the PEC at the official residence of the President of the Senate, Rodrigo Pacheco (PSD-MG).

The current revenue foreseen in the budget proposal is R$ 1.15 trillion. A percentage of 2% would be equivalent to R$ 23 billion.

The amount would be added to the R$ 175 billion needed to maintain the minimum benefit of R$ 600 from Auxílio Brasil (which should be renamed Bolsa Família), plus the portion of R$ 150 per child up to six years old. That expenditure would be outside the spending ceiling — a fiscal rule that limits expenditure growth to the variation of inflation.

The proposal to use the 2% of net current income for investments was included in the draft of the Transition PEC that is being negotiated between parliamentarians, as well as the permanent withdrawal of Bolsa Família from the scope of the spending limit.

Interlocutors heard by Sheet assess that this version is not yet definitive and may change in the coming days. This Friday (11), senator-elect Wellington Dias (PT-PI), representative of the new government in the negotiations on the Budget, released a note informing that the formal presentation of the proposal should only take place on Wednesday (16).

“After yesterday’s agendas [quinta]given some suggestions made by the Chamber and Senate, we feel the need to talk to President Lula again”, said Dias.

The expectation now is that new negotiations will be made between the transition team and the congressional leaders.

The very idea of ​​using extraordinary income to fund investments is not a consensus. However, it has been defended by parliamentarians to boost works and also expenses of this type in areas such as health, education and research.

One of the arguments of this wing is that the extra expenditure would have a kind of fiscal backing, that is, it would be carried out through the inflow, in the previous year, of some non-recurring revenue — such as a bonus for signing contracts for oil exploration.

By the logic under discussion, the collection of this type observed in 2022, for example, would free up space for expenses next year, up to the limit of R$ 23 billion. If there is no such fiscal backing, the additional expenditure could not be carried out.

“There is also an idea, we need to see the text as it comes, of exceptionalizing 2% of extraordinary revenues. But it is a not so expressive value”, said Castro on Thursday. 🇧🇷[Os 2%] They would be permanent too, at least that’s what I’m understanding. It has to be seen how this will be written in the PEC. Spend up to 2% of current net income.”

Earlier, Dias had also confirmed the discussion about the use of extraordinary recipes.

“This proposal was not from the transition team, it came up in the House and Senate. We ask for an effort on the allocation of amendments, for a significant part to be prioritized as ‘amendments for investments’, to help integrate and expand private investments, with better results in the social and fiscal economy”, he said.

According to the elected senator, the goal is to boost investments to 1% of GDP (Gross Domestic Product), equivalent to around R$ 100 billion.

By removing Bolsa Família from the spending ceiling, the new government expects to release the R$ 105.7 billion currently reserved for the program in the budget proposal. The money can be redistributed to actions with few resources for 2023, such as Popular Pharmacy, real increase in the minimum wage, health actions, education and public works.

The PEC should also provide for an exception to the fulfillment of the primary result target, which authorizes a deficit of up to R$ 65.9 billion in 2023. But this measure would only be valid next year.

Starting in 2024, the new government will need to incorporate spending on the program into the fiscal target – which will force the exposure of the deficit or the adoption of measures to contain it.

Another exceptionality that will only be valid for 2023 is the one that reaches the rules of the LRF (Law of Fiscal Responsibility). The PEC will allow Lula’s team to create a new permanent expense without the need for compensation, but only next year.

If the new administration wants, from 2024, to increase the amount beyond the current R$ 600, the permanent increase in spending will need to be offset by cutting expenses or by increasing the country’s tax burden, as required by the LRF.

This point has been considered relevant in the face of fears in the financial market that the withdrawal of the program from the spending ceiling will serve as a kind of authorization for the future Lula government to significantly increase the value of the benefit.

The size of the PEC’s total bill has also worried investors, and contributed to the bad mood that spread after the speech by President-elect Luiz Inácio Lula da Silva (PT), this Thursday.

“Why are people made to suffer to guarantee such fiscal stability in this country? Why do people all the time say that spending needs to be cut, that it is necessary to have a surplus, that it is necessary to have a spending ceiling?”, said Lula.

PT’s speeches were poorly received by the financial market, which fears a lack of control of public accounts and indebtedness in the wake of increased expenses.

Vice-president-elect Geraldo Alckmin (PSB) reacted to these criticisms. “If anyone had fiscal responsibility, it was the Lula government,” he said. Lula’s allies, in turn, believe that the market exaggerated the negative reaction after the PT’s speech, but one wing admits that he should be more cautious in his speeches about the economy.