Public Accounts Close June with Record Deficit of R$194.7 Billion

RIO DE JANEIRO, BRAZIL – The National Treasury reported yesterday, July 30th, in Brasília, that the government’s public accounts closed June with a R$194.7 billion (US$39 billion) negative balance.

The record primary deficit of the central government (National Treasury, Social Welfare, and Central Bank), with expenditures higher than revenues but excluding interest expenses, was impacted by the Covid-19 pandemic. In June 2019, the primary deficit stood at R$11.8 billion.

“As in the preceding month, the June deficit is primarily explained by the significant reduction in revenue, coupled with the increase in Executive Branch expenses resulting from measures to tackle the Covid-19 crisis, as well as the anticipated payment of the 13th month benefit for retirees and pensioners of the Social Security System and the cumulated payment of judicial bonds,” says the National Treasury report.

Last month, in real terms (discounting inflation), net revenues dropped R$29.3 billion (-31 percent), while total expenses increased R$153.4 billion (+144 percent), when compared to June 2019.

The deferred payment of taxes contributed to reducing revenues by R$20.4 billion. The downturn in economic activity also contributed to reduce revenues.

In the case of expenses, the result was primarily influenced by measures to tackle the crisis triggered by the Covid-19 pandemic, which totaled R$96.8 billion in June. “Highlights include emergency aid to people in situations of social vulnerability (R$44.7 billion), additional expenses by the Ministry of Health and other Ministries (R$19.9 billion), emergency aid to states, municipalities and the Federal District (R$19.7 billion), and the Special Benefit for the Maintenance of Employment and Income (R$7.1 billion),” says the report.

In addition, the Treasury adds, there was a “pronounced increase” in the payment of social welfare benefits, which increased 57.8 percent in real terms (R$28.2 billion) due to the anticipated payment of the 13th month of retirement and pensions and the payment of judicial trust funds.

In the first half of the year, the primary deficit reached R$417.2 billion, against R$29.3 billion in the same period in 2019. The net revenue fell R$116.5 billion (-18.1 percent) in this period and total expenses grew R$271.1 billion (+40.3 percent) over the same period in 2019.

For this period, the estimated tax deferral amounts to R$81.3 billion, while the decrease in the Tax on Financial Operations (IOF) on loans totaled R$6.3 billion. In terms of expenses, until June 2020, the costs incurred with measures to tackle the crisis totaled R$210.6 billion.

“It is important to stress that the programs to tackle the economic and social impacts of Covid-19 are temporary, with implementation centered on the 2020 fiscal year. Additionally, as most of these programs involve cash transfer actions, their implementation is not expected to generate high amounts of outstanding payments for the following fiscal year, as would be expected in the case of grant and/or public investment programs,” the National Treasury points out.

Source: Agência Brasil