How does the government settle accounts to reduce the 2024 deficit?

Economist Marcos Mendes, researcher at the Business School ImportantHe conducted a survey outlining the measures the federal government is adopting to improve the fiscal score (the relationship between revenues and expenditures in public accounts) for the coming year. These measures, in general, forecast expenditures, further worsening the 2023 account, but defer revenues, facilitating the implementation of the 2024 budget.

According to Mendes’ analysis, this adjustment in revenues and expenditures was evident in the figures presented in the fifth bimonthly government expenditure report, which was released on Wednesday (22/11) in Brasilia. In the previous report, No. 4, announced in September, the deficit amounted to R$141.4 billion. Now it has risen to R$177.4 billion. In other words, there was a jump of R$36 billion.

“When analyzing the previous document, as of September, with a deficit of 1.3% of GDP, I said the real value would be closer to 1.9% of GDP,” Mendes says. “This is exactly the number brought by the fifth report. I have always maintained that expenditures were underestimated and revenues were overstated. As we reach the end of the year, the final report will get closer to reality, abandoning unrealistic assumptions.

Mendes considers that the strategy of advancing expenses and deferring income, worsening the 2023 result to improve the 2024 result, was expected. “This is because the zero deficit target for 2024 is challenging and is under the spotlight of political and economic debate.” “The 2023 target has been extended and includes an increase in the deficit.”

The economic expert draws attention to the following points from the amendment that was made to facilitate the implementation of next year’s budget:

• Revenues from transfer of judicial deposits from Savings bank to treasureR$12.6 billion will no longer be counted this year, to be included as revenue next year.
• The financial support to states and municipalities, which will be paid over three years, will extend to this year.
• The Central Bank did not agree to record the transfer of PIS/PASEP resources to the Treasury (R$26 billion) as primary revenues. Therefore, there is a statistical discrepancy between the score calculated by the Treasury and the score calculated by the Central Bank. Since the official value of the primary deficit is that calculated by British Columbia, the expected deficit is R$203 billion (1.9% of GDP).

The deficit is “alarming.”

Economist Felipe Salto, from the brokerage Warren Reyna The former finance minister of São Paulo described the content of the government’s fifth report on revenues and expenditures as “worrying.” “This makes the task of rebalancing accounts within a reasonable timeframe more difficult,” he says. “Confidence in fiscal sustainability is one of the determinants of the interest curve, with its impact on economic stability and growth.”

For Salto, the increase in the deficit by R$36 billion was the result of mathematics whose principle is very simple. There was a decrease of R$14 billion in expected revenues, while expected expenses increased by R$21.9 billion. In other words, less was collected and more was spent.

Decreased revenue

As for revenues, there were two critical factors in Salto’s evaluation. One of them relates to the fact that “there is no longer confidence in the flow of R$12.6 billion related to Caixa’s judicial deposits.” [tema acima mencionado acima por Mendes].

The other is the result of a decrease of R$ 7.9 billion in revenue forecasts from taxes and contributions, in particular import tax, income tax, coffins and CSLL. “Without the increase in revenues generated from natural resource exploration amounting to R$5.9 billion, the deficit would have been more pronounced,” says Salto.

High expenses

Regarding expenditures, the main culprit for the increase was financial support to states and municipalities, which was also mentioned due to the expectation of compensating for losses in ICMS revenues until 2023 due to Supplementary Laws 192 and 194. This support has grown by R $ 16, 3 billion. “It is also worth highlighting the increase of R$2 billion with the forecast for social security expenditures,” says the economist.