Government announces additional block of BRL 6.73 billion in the federal budget

O federal government announced this Friday (22) an additional block of BRL 6.73 billion of resources from the Budget .

The announcement was made through the Evaluation of Revenues and Expenses, in an extra edition of the Official Gazette (DOU), published this Friday. The information had been anticipated by the Policy analyst at CNN Renata Agostini.

“The need for total blocking for the 2022 financial year rises from BRL 9.96 billion in the 2nd quarter to BRL 12.74 billion in the 3rd quarter; that is, an increase of R$ 2.77 billion”, said the Ministry of Economy in a note. According to the folder, the details of the blockage will come out in a week, when the programming decree is published.

This is not the first blockade promoted in the federal budget. In March, the obstruction of R$ 1.7 billion was disclosed. In June, came the second, of R$ 8.7 billion. All of them aim to meet the spending ceiling.

The move took place after the approval of the call Benefits PEC which involves R$ 41.25 billion of new spending outside the roof justified by the declaration of a state of emergency.

In addition, cuts in portfolios have been sought by the government, as is the case with the Legislative’s decision to release resources from the National Fund for Scientific and Technological Development (FNDCT), a R$ 2.5 billion account.

Another point was the overthrow of the presidential veto of the Paulo Gustavo Law, which provides for investments of R$ 3.8 billion in the cultural sector.

tax projections

The Union’s projection for Total Primary Revenue in 2022 increased by BRL 59.014 billion to BRL 2.226 trillion. For Net Transfer Revenue in 2022, it increased by BRL 51.955 billion, to BRL 1.774 trillion.

The projection for Total Primary Expenditure in 2022 increased by BRL 45.819 billion, to BRL 1.834 trillion. Of this amount, mandatory expenditure increased by R$46.746 billion, to R$1.679 trillion, and discretionary expenses fell by R$927 million, to R$154.246 billion.

The projection for the central government’s primary deficit decreased by R$ 6.136 billion, to R$ 59.354 billion (0.6% of GDP); the target for the central government’s primary deficit this year is R$170.473 billion.

“This projection for the central government’s primary deficit already incorporates EC 123/22 (R$ 41.25 billion) and LC 194/22 – reduction of PIS/Cofins/Cide on gasoline and ethanol (R$ 16.51 billion )”, said the folder.

The economic team projects a 2% increase in GDP for the year, with IPCA at 7.2%.

market perception

The government’s decision is a way of responding to criticism, and signaling some commitment to the spending cap, which is a sign even if the frozen resources are smaller than those of the PEC, experts explain.

Officially, the government justified the new blockade due to recent decisions by the National Congress which increased budget expenditures.

Despite recent records in revenue, the government is unable to afford the new spending and respect the ceiling, requiring a freeze.

The blockade is the third announced by the Ministry of Economy this year, and follows one of R4 1.7 billion in March and another of R$ 8.7 billion in June.

In addition to the justification, the decision is a sign that the government has not completely forgotten about the spending ceiling, even with the approval of the PEC, according to Juliana Inhasz, a professor at Insper.

“The government is trying to cut wherever it can to stay inside the roof. It’s a sign of respect, of trying to comply, now, if you’re going to make it, it’s another five hundred”, she evaluates.

In this sense, the government’s objective seems to be that, despite market criticism, there is an effort to maintain the ceiling requirements.

The blocking decision also follows a legal requirement, as the spending cap law requires such blockades, preventing the government from committing any irregularities, recalls Nord Research founding partner Marília Fontes.

She also states that the market expects new locks due to the approval of measures in Congress that will lead to new spending. Some estimates pointed to the need for the blockade to reach R$ 8 billion.

“On the one hand, the announcement is positive. But the ceiling is quite demoralized, with several actions by the government to spend outside it, especially with the PEC of Benefits, and the greater retention itself is occurring precisely because it has made these benefits, increasing expenses, so it needs to cut others”, he says. Sources.

In general, the economist considers that it is “better to retain than not to retain”, but the value is small compared to the size of expenditures foreseen with the PEC, involving measures such as increase in the value of Auxílio Brasil and the gas voucher and a new aid for truck drivers.

Inhasz points out that the announcement after the negative reaction of the market indicates that the measure was thought only after the approval of the Benefits PEC, not together, which would have given more credibility to the government in the fiscal sphere.

“The question that remains is, how much respect for the ceiling exists? The fiscal risk continues to exist, the government has shown that if it needs to, it spends more, and it was clear that it has a limit to respect the ceiling”, says the professor.

For Alexandre Espírito Santo, chief economist at Órama, the problem is not the Benefits PEC itself, but a “continuity of new expenses”, indicating that the spending ceiling has “leaks”.

“I continue to think that the market will continue to increase the country’s risk premiums, or keep them at high levels, until a new fiscal anchor is signaled”, he evaluates.

The Insper professor also does not believe that the announcement will generate a change in the perception of fiscal risk, since “the feeling is that if the government needs it, it will go through the roof, and that is bad for the investor”.

“The government is unable to regain the levels of trust that have been lost. Everything you do now is little compared to the greater damage that has already been installed”, she considers.

Fontes points out that there is still uncertainty in the market regarding the frequency of the program. The Benefits PEC establishes it as temporary, but there is a risk that it will be kept permanently, which increases the fiscal risk and values ​​the dollar before the real .

“The blockade is the minimum to comply with the law, but the objective of the ceiling, to give fiscal control, avoid new expenses, is not being fulfilled, hence the increase in the risk premium and the exchange devaluation”, he explains.

For her, the blockade “is very little to reduce the perception of risk, it’s better than if it didn’t, but the PEC has a greater impact and generates”.