Insider

Budgetary guidelines bill moves Brazil’s fiscal goalposts

Members of the Planning and Finance ministries, announcing the government's Budgetary Directives Law proposal. Photo: Washington Costa/MPO

Brazil’s federal government on Monday disclosed details of its bill on the 2025 Budgetary Directives Law (LDO). As expected in recent press reports, the bill downgrades 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.

Hours before the press conference, Finance Minister Fernando Haddad had confirmed the downgrade in a live TV interview.

The bill, which will be sent to Congress, also downgrades a previously projected surplus of 1 percent of GDP in 2026 to 0.25 percent.

The bill also projects an increase in the minimum wage to BRL 1,502 (USD 289) in 2025, up from the BRL 1,435 previously projected for the same year. The minimum wage has cascading effects on government spending such as social security.

Today’s presentation is 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, instead of meeting its zero-deficit target.

Atypical events helped the government reach a record in revenue for the month of February, and a real 8.8 percent increase in the first two months of the year compared to the same period in 2023. As The Brazilian Report showed, this encouraged the administration to seek a change in the fiscal framework, enabling it to spend an additional BRL 15.7 billion (USD 3.03 billion) this year. Approved by the House last week, the bill will proceed to the Senate.

The dollar went up 1.24 percent in relation to the Brazilian real today. This marks the fourth consecutive daily hike in the dollar, and also the first session since Saturday, when Iran launched an airstrike on Israel in retaliation to the Israeli attack on the Iranian embassy in Damascus on April 1.

Neither Mr. Haddad nor Planning Minister Simone Tebet participated in today’s press conference, which was held by some of their deputies.