Extra spending of up to BRL 136 billion does not bring fiscal expansion, says transition

Amidst criticisms about the size of the expenditure bill sought by the team of the president-elect, Luiz Inácio Lula da Silva (PT), the transition team calculates that an additional expenditure of up to R$ 136 billion in 2023 would not represent a fiscal expansion in compared to 2022, the last year of the Jair Bolsonaro (PL) government.

The invoice amount outside the spending ceiling is the most sensitive point of the PEC (Proposed Amendment to the Constitution) of the Transition. The text must be finalized by this Tuesday (22).

The version presented last week to the National Congress provides for the withdrawal of Bolsa Família from the scope of the spending ceiling and the possibility of making investments outside the limit. Although the PEC does not bring any explicit value in its text, the PT estimates point to an expense of up to R$ 198 billion.

Of this amount, R$ 175 billion would go towards paying the minimum benefit of R$ 600 to Bolsa Família beneficiaries and to finance the extra installment of R$ 150 per child up to six years old. Another R$ 23 billion would go to public investments.

The size of the extra expenditure has alarmed the financial market, which criticizes the fiscal expansion and sees in the PEC a risk to the trajectory of Brazil’s public debt.

Former Minister of Finance and Planning Nelson Barbosa, who is one of the four coordinators of the technical group for the economy in the transition, said this Monday that an extra expenditure of BRL 136 billion in 2023 would not mean a fiscal expansion in relation to 2022.

“This year, the Bolsonaro government will spend, according to the last bimonthly report, 18.9% of GDP [Produto Interno Bruto]”, he said. “For next year, the government proposed spending of 17.6% of GDP, significantly lower than this year.”

“What does this mean? It means that if you add up to BRL 136 billion in spending in next year’s Budget, in terms of the size of the economy, it will not be fiscal expansion. Next year’s spending will be equal to what was actually done last year year of the Bolsonaro government,” said Barbosa.

He points out that the projection considers the growth estimate made by the current government when it sent the budget bill, in August. The forecast was for an increase of 2.5%, with a nominal income generated in the amount of R$ 10.6 trillion.

The former minister also said that an additional authorization of BRL 70 billion, as has been proposed, “is little” given the compression of several areas in the Budget. He stressed, however, that this is a personal assessment and that the transition economy team did not reach any consensus on numbers.

Senator Randolfe Rodrigues (Rede-AP) said that the text of the PEC is close to being finalized and should be presented on Tuesday (22). “I think by tomorrow [terça] already have the text. I don’t think it will be different from what you are aware of, disclosing, with a margin of 4 years. And we are going to talk and dialogue with Parliament, “she said.

Randolfe also considers that the alternative proposal to withdraw BRL 70 billion from the spending ceiling to pay for the income transfer program in 2023 is insufficient.

This weekend, Senator Alessandro Vieira (PSDB-SE) presented a PEC that removes from the spending ceiling the limit of R$ 70 billion within the LDO (Budget Guidelines Law) for 2023 for the permanent income transfer program.

“You need to have margin for this, I don’t know if the R$ 70 billion margin is enough for that. Our accounts lead to a margin greater than that, but we are grateful for Senator Alessandro’s contribution, it is one of the proposals for the debate “, Randolf said.

In the Legislature, there is a movement for the expansion of expenses for next year to be below the level defended by allies of the president-elect, Luiz Inácio Lula da Silva (PT).

The PT believes it has enough votes to approve a PEC that guarantees the maintenance of Bolsa Família at R$ 600 in 2023, a proposal presented by both Lula and Bolsonaro during the elections.

In addition to the impasse over the value of the extract invoice, there is a discussion about the duration of the authorization. The draft of the PEC was presented last week with no deadline – that is, with permanent validity.

Randolfe said this Monday that the most likely term is four years and that the counterpart may come in the text of the PEC or in the medium term, with proposals for fiscal adjustment in the course of the new government.

There is a movement, however, for this period to be reduced. Leader of the centrão and Minister of the Civil House of Bolsonaro, Senator Ciro Nogueira (PP-PI), for example, defends that the authorization to burst the ceiling is only for 2023, the first year of the new administration.

The presidents of the Chamber, Arthur Lira (PP-AL), and of the Senate, Rodrigo Pacheco (PSD-MG), have been pressured by the liberal wing of Parliament and by members of the financial market to reduce the value that will burst the ceiling. The argument is that too high a value would unbalance the public accounts and call into question fiscal responsibility.