Government announces R$ 8.2 billion cut in ministries’ funds

The Ministry of Economy announced this Friday (20) the need for an additional cut of R$ 8.2 billion in the Budget to avoid the bursting of the spending ceiling, a fiscal rule that limits the growth of expenses to the variation of inflation.

The announcement means that the ministries will have their discretionary funds (which include funding and investments) reduced, due to the increase in mandatory expenses such as court sentences and subsidies to agricultural financing.

The government had already blocked BRL 1.7 billion in resources in March. With this, the total resources locked in the Budget reaches R$ 9.9 billion.

as showed the Sheet, the government split the budget cut in the face of the impasse involving President Jair Bolsonaro’s (PL) promise of a more generous salary increase for police careers. The desire to privilege some categories created an impasse in the final decision on readjustments to functionalism.

Without a definition, the government left for July an additional block of about R$5 billion to accommodate the impact of the 5% readjustment to all servers and a differentiated increase for police officers.

There is an understanding that Bolsonaro can send the bills that deal with the readjustments to Congress and sanction them after approval by parliamentarians without having a prior reservation in the Budget for the increase in spending.

The only condition, according to these technicians, is that all the steps until the publication of the laws occur until the beginning of July – when the prohibition of the LRF (Law of Fiscal Responsibility) of increase of expenses with personnel in the last 180 mandate days.

as showed the Sheet, the government estimated that it needed a blockade of around R$ 15 billion to compensate for the growth in mandatory expenses and also the readjustments. Another R$ 2 billion would be needed to cover readjustments in the other powers.

“The budget is small. In giving 5% [de reajuste]it will be R$ 17 billion reais”, said the president in his weekly live on Thursday night (19).

In recent days, however, the discussions on how the remuneration of civil servants will be marked by comings and goings. Bolsonaro wants a different treatment for public security servants, an idea that faces resistance within the first echelon of the government due to the risk of dissatisfaction from the other categories.

Internal calculations indicate that the Executive needs another R$ 4.6 billion to be able to afford the 5% linear adjustment for all servers. The total cost of the measure is R$6.3 billion, but the Budget already has a reserve of R$1.7 billion.

If there is a one-off restructuring of the careers of the PRF (Federal Highway Police) and Depen (Department of Penitentiary), there will be an additional impact of R$300 million to R$400 million.

Given the lack of definition and the short deadline, the technicians’ option was to leave the impact of the readjustments to be incorporated in the report that will be presented until July 22nd.

In this Friday’s bimonthly report, the greatest pressure comes from RPVs (small value requisitions), convictions suffered by the Union in the amount of up to 60 minimum wages, and court sentences. The value rose R$ 4.8 billion.

Although the National Congress approved last year a sub-ceiling for precatories, which also covers these RPVs, technicians interviewed by the report informed that the limit is applied in the preparation of the Budget.

If projected spending on sentences rises during the year, as is the case now, the government needs to meet this need by cutting other non-mandatory spending. It is not possible to cut the other precatorios already accounted for in the sub-ceiling.

It was also necessary to increase by R$ 2.3 billion the forecast of resources of the Safra Plan, which finances the producers of the crops. The funds will finance the reopening of operations for the 2021/2022 period (R$ 1.1 billion) and the launch of the 2022/2023 Plan, in July (R$ 1.2 billion).

The technicians also mapped the need to increase by R$ 2 billion the budget for Proagro, a guarantee program for financing in the rural sector.

There is also an increase of R$ 1.9 billion in the forecast of expenses with the payment of the salary bonus — a kind of 14th salary paid to workers with a formal contract and who earn up to two minimum wages — and of R$ 0.9 billion in the BPC (Continued Payment Benefit).

Some expenses, such as social security benefits and personnel expenses, fell, so that the balance of the impact on the Budget was R$ 8.2 billion.

Despite the need to tighten spending, the government recorded an increase of R$ 36.3 billion in its net revenue.

With this, the deficit forecast for the year should be smaller and close at R$ 65.5 billion. According to the Ministry of Economy, the estimate already considers the impact of tax exemptions, which already total R$ 60.8 billion, and the agreement to end the dispute over Campo de Marte (R$ 24 billion).

On the expenditure side, the cuts will result in a strong tightening of discretionary expenses for the portfolios, which include administrative costs and investments.

This is because, according to reports collected by the report, Bolsonaro wants to shield the rapporteur’s amendments, an instrument used by Congress to irrigate its electoral bases with federal resources, without following principles of transparency or equity in the distribution of funds.

The 2022 Budget was approved with an amount of R$ 16.5 billion for the rapporteur’s amendments. Of this amount, R$1.7 billion was blocked in March to accommodate an increase in mandatory expenses.

Technicians collected information on the low execution of the rapporteur’s amendments — so far, only R$ 200 million have been executed, equivalent to about 1.3% of the authorized allocation. Therefore, from an operational point of view, it would make sense to reallocate resources and avoid a collapse in the folders that are already heavily compressed.

However, in an election year and under strong pressure from allies, the president’s orientation is to stay away from these funds when applying the budget cut.