This year, the Brazilian government expects to record its first primary surplus since 2013. While being positive news for the country’s public accounts, the announcement also came with an extra BRL 2.6 billion (USD 500 million) budget freeze in order to meet public spending rules. A little more than a week until the first round of the general elections, the news could not have come at a worse time for President Jair Bolsonaro.
This scenario only underlines the government’s difficulty in dealing with the current fiscal anchor and casts doubt on the continuity of the current spending cap rule, which limits any increase in public expenditure to the inflation rate of the previous year.
During the presentation of this year’s budget income and expenditure report, Special Treasury Secretary Esteves Colnago announced the need for an additional BRL 2.6 billion to be frozen from the budget to comply with the spending cap. Mr. Colnago did not say which areas will have resources withheld, explaining that they will be announced by way of a decree before the end of the month — after the election.
“It is difficult to find budget space in this fiscal year to bear unexpected expenses. […] And we did not expect a growth of this magnitude in mandatory expenses,” said the secretary, who pointed out there was an unforeseen bump in social security benefits.
The decision takes the total budget freeze for this year up to BRL 10.5 billion. The additional blockage will come from non-mandatory expenses which have not yet been authorized in this year’s budget, which are between BRL 19 and 20 billion.
Of this, BRL 3.7 billion are earmarked for parliamentary grants, a system of opaque budget allocations that give lawmakers influence over the federal purse as a reward for legislative support. The Brazilian media has...
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