Dario Durigan, Brazil’s deputy finance minister, admitted that the government will face challenges that can hinder its effort to meet the zero-deficit primary target for 2024 if Congress approves new expenses.
Mr. Durigan said in an interview published on Wednesday that the government is trying to ensure that the budget approved in 2023 “has the exact balance between revenues and expenses.” However, “other issues” currently being discussed in Congress might mean that “we cannot carry out the plan” as initially approved by lawmakers.
These include a potential cut in payroll taxes for municipalities, a package of tax breaks for sectors associated with hotels, events, bars, restaurants, and theaters, which passed the House on Tuesday, and a bill currently discussed on the Senate floor to raise the salaries of judges and prosecutors. The tax break bill for the events sector, nicknamed ‘Perse,’ was limited to a total of BRL 15 billion (USD 2.9 billion) until late 2026.
Last week, the government announced details of its bill on the 2025 Budgetary Directives Law (LDO). The bill downgraded the projected fiscal surplus in 2025 to a zero-deficit goal from a surplus of 0.5 percent of the GDP previously projected in the budgetary law enacted for this year.
The bill was yet another change in fiscal goalposts by the Luiz Inácio Lula da Silva administration. Since the approval of the fiscal framework in August 2023, the government has been taking steps to gain more leeway to spend.
Back in January, the Federal Accounts Court, a public spending watchdog, issued a report estimating that Brazil could post a primary deficit of BRL 55 billion (USD 10.6 billion) this year, rather than meeting its zero-deficit target. This was before discussions on issues such as tax breaks for the events sector and improved pay for judges gained steam.
Mr. Durigan added that the government will need around BRL 50 billion (USD 9.6 billion) next year to reach the zero-deficit goal and that it will seek to approve measures with that objective this year.
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