RIO DE JANEIRO, BRAZIL – The Ministry of Economy evaluates the convenience of sending a bill amending the Budget Guidelines Law (LDO) to reduce the primary deficit target for 2022 between R$60 billion and R$70 billion (US$14 billion).
The current deficit target is R$170.5 billion for next year. The information was published in the newspaper “O Estado de S. Paulo” and confirmed by Valor.
A senior source estimates that the measure would be a very positive sign about the trajectory of public accounts but says that the hammer is not hit, and there are doubts about whether the measure will move forward.
According to this source, even with the spending cap holding back expenses, reducing the target would reinforce the government’s spending containment.
It is worth remembering that other expenses can be made outside the spending ceiling through extraordinary credits, and a tighter target would be a sign of restriction to this type of operation, writes Valor.
In addition, it would also restrict tax cuts, which would be a form of fiscal expansion that circumvents the spending limit constraint. In recent weeks, the government has been discussing a tax reform proposal that will cause at least R$30 billion in revenue waivers next year.
The primary result target for 2022 is a deficit of R$170.5 billion, but it was made without updating the parameters of revenues and expenses.
It is important to note that revenues have surprised the federal government this year, driven by higher inflation, economic growth, and improved relative prices due to commodities.
Source: Estadão, Valor