Brazilian state governments have largest deficit in history for October

In October, Brazilian state governments had a nominal deficit of R$3.2 billion (US$603 million).

This was the largest negative balance in the state accounts for the month in the historical series that began in 1998.

The account is part of the primary result of regional administrations, which is the revenue subtracted by expenses, excluding interest payments on debt. The Central Bank (BC) released the report on Wednesday (Nov. 30).

The consolidated public sector accounts – formed by the federal government, the Central Bank, states, municipalities, and state-owned companies – had a surplus of R$ 27.1 billion.

But the result was boosted by the central government’s accounts, which totaled R$30.2 billion.

The regional governments (states and municipalities) had a deficit of R$3.9 billion, with the states having a negative balance of R$3.2 billion. In the same month in 2021, there was a R$3.4 billion surplus.

The States’ revenue fell in October because of lower ICMS (state-level VAT) revenues. It dropped 13% in the month against the same period last year.

In June, Congress approved a limit on the tax rate on fuels, electric energy, and telecommunications.

The rule ends on Dec. 31. The measure has impacted the states’ accounts but helped reduce inflation in 2022.

In 2020 and 2021, the states began to have surpluses because of the increased revenue from the IMCS. The prices of energy and gasoline rose in the period.

In addition, resources were transferred from the Union to the federal entities. Freezing public employees’ salaries also helped decrease the forecasted expenses.

From July to October – the first four months that the measure was in force – the states registered a negative balance of R$2.9 billion.

This was the largest nominal deficit for the four-month period since 2014, the period of the economic crisis of the Dilma Rousseff government (PT, progressive-globalist).

POSITIVE BALANCE IN 2022

Even with the negative primary result, the states have a surplus of R$53 billion from January to October.

The consolidated public sector recorded a positive balance of R$157.9 billion in the same period.