RIO DE JANEIRO, BRAZIL – After two months in positive territory, the central government’s budget recorded a primary deficit in May. Last month, the difference between revenues and expenditures was negative at R$20.947 billion, according to the Ministry of Finance.
The result – which combines the accounts of the National Treasury, Social Security, and the Central Bank – was the best for the month since 2019, when it was negative by R$126.636 billion in May 2020, influenced by additional spending to fight Covid-19.
Last month’s surplus was lower than the median of financial market expectations, which pointed to a negative balance of R$24.2 billion, according to a survey of 20 financial institutions by Broadcast Projections.
The May figure was within the range of estimates, ranging from a shortfall of R$51.400 billion to a deficit of R$13.088 billion.
In the year to May, the primary result records a surplus of R$19.911 billion, the best result for this period since 2013. In the same period last year, this result was negative at R$222.493 billion.
In May, sales increased by 78.2% in real terms compared to the same month last year. On the other hand, expenses decreased by 31.4% in the same comparison, already taking into account inflation.
Compared to the year-to-date, revenues increased by 24.7% in real terms, while expenses decreased by 17.3%.
In the 12 months through May, the central government has a deficit of R$535.7 billion – equivalent to 6.3% of GDP.
The fiscal target proposed by the economic team this year allows for a deficit of up to R$247.118 billion in the central government’s accounts. Still, the government projected a smaller hole in the last bimonthly report, even with additional spending due to the Covid-19 pandemic.
Composition
According to data released by the Treasury, the accounts of the National Treasury – including the Central Bank – recorded a primary surplus of R$6.325 billion in May. This year, the accumulated primary surplus in the accounts of the National Treasury (including the Central Bank) is R$123.220 billion.
The INSS result last month showed a deficit of R$27.416 billion. In the year to May, the result was minus R$103.239 billion.
The Central Bank accounts alone had a surplus of R$143 million in May and a deficit of R$70 million in the year to date through last month.
Spending cap
According to the Ministry of Finance, expenditures subject to the spending cap fell 1.0% in May compared to the same month in 2020. The account does not include extraordinary expenditures to combat the effects of the new coronavirus pandemic, which are exempt from the cap because they are urgent and unforeseen.
Under the cap rule, the limit on the growth of government spending is the cumulative variation of inflation in 12 months ending last June. However, since the government has not used the entire limit provided in previous years, there is a margin of up to 5.9% in practice.
Each agency has an individual limit. Given these particular limits, only the Judiciary of the Federal Districts and Territories and the National Council of the Civil Service are currently above the allowed spending growth. However, the assessment of compliance or non-compliance with the ceiling is made only at the end of the fiscal year.
In the case of DF-Justice, the increase in expenditures is 3.7%, above the limit of 2.8%. In the CNMP, the advance is 3.8%, compared to the limit of 3.3%.
In the Executive Branch, spending is down 1.1% so far, ahead of the expansion limit of up to 6.0%.