PEC dos Precatórios Can Give Bolsonaro Up to 35.5 Billion Rls to Increase Spending in Election Year – 12/16/2021 – Market

a PEC (Proposal to Amend the Constitution) from Precatório President Jair Bolsonaro (PL) may give an additional 35.5 billion Brazilian reals room to spend in an election year, according to estimates by the Federal Senate’s Independent Finance Corporation.

proposal or offer, The last part was released this Thursday (16) By the National Congress, a total profit of R$117.9 billion, shall be opened in the Agency’s accounts.

A large part of this amount will be allocated to expanding the social program, which is now called Brazil AidCorrecting social security benefits and aid as a result of high inflation rates.

The remaining amount, calculated at 35.5 billion Brazilian reais, may be allocated to other primary expenditures of the federal government, according to the International Finance Corporation.

Conference Additional Clearance Seal To be used for mandatory or related expenses in the social field and Extension of exemption from corporate salaries.

However, the measure does not guarantee that the funds will be used exclusively in these areas, warned the CEO of the International Finance Corporation, Felipe Salto.

“The peg was a positive initiative by the Senate, not least because it sparked more debate, but it is very difficult to put stamps on public money. [pelo lado da despesa]. Restricting revenue would be more effective,” he said.

IFI Director Daniel Corrie explained that, in the way the text was written, the space was linked to already existing expenses, and not to the growth of these expenses. With this interpretation, simple approval of the budget is sufficient to attend the constitutional order.

The release of the number may put more pressure on the government, which already had to manage it Various requests to increase expenses In an election year.

Bolsonaro has promised, for example Salary adjustment for the Federal Police. Ministry of Justice Calculating the effect of the measure at R$ 2.8 billionBut the Ministry of Economy is working to determine this amount.

The IFC’s projections for the total open space in the spending ceiling—a rule that limits the payment of expenditures to inflation differentials—is greater than 106.1 billion Brazilian reals, according to the federal government’s estimate.

The most significant expansion is due to the acceleration of inflation. While the government expects the IPCA (National Broad Consumer Price Index) to close the year at 9.7%, the IFI estimates a variance of 10.4%.

Even if general inflation ends close to the Economy Ministry’s estimate, Bolsonaro’s extra space to spend in 2022 will still be R$24.6 billion, according to the foundation.

PEC dos Precatórios promotes two changes that open up space in income. the first, aged already, is the change in the spending cap calculation base, now corrected for inflation for the 12 months through December of the previous year – before that, data for the 12 months through June was used.

In government accounts, this change would release R$62.2 billion, but the IFC expects a higher value of R$73.2 billion.

The other amendment is the maximum payment of court orders and judicial debts of the Federation against which there is no longer any appeal. The maximum would allow the government to defer the settlement of these debts – which is why the proposal became known as PEC do Calote.

According to the Senate body, the maximum court order will unlock another 44.7 billion R$. The government estimated an area of ​​43.8 billion Brazilian reals.

A third factor is also contributing to the additional stagnation of Bolsonaro’s spending in 2022. In IFI’s calculations, the government’s estimate of mandatory spending next year is inflated.

The government estimates the additional expenditures with the re-adjustment of pensions at R$29.2 billion. The corporation, in turn, expects an increase of 17.5 billion Brazilian riyals.

The differences extend to projections of assistance expenditures, unemployment insurance, and minimum health and education expenditures.

a An increase of R$54.6 billion in the Brazilian aid budget, which Guedes’ team has proposed to the 2022 budget rapporteur, Deputy Hugo Lille (PSD-RJ), will also be smaller. In the IFI estimate, the additional expenditure will be R$50 billion.

“Government has always had this tendency to be more conservative,” Salto said. However, he cautioned that the numbers could change, he urged caution before classifying the government’s estimates as exaggerated.

Earlier this year, Congress made deep cuts to mandatory spending forecasts to bolster parliamentary amendments, which Let the budget be made up. The economic team needed to reverse part of the changes in order to be able to meet the pension payments.

The higher spending scenario would push the government’s total debt to resume its growth trajectory next year. The agency expects the index to end in 2021 at 82.1% of gross domestic product (GDP), rising to 84.8% in 2022.

“The Institute of International Finance highlights the loss of credibility associated with changes to the spending cap and the preliminary system as a central point of interpretation for the prospective framework deterioration. This is not a bankruptcy scenario, but a scenario of the fragility of fiscal rules,” he said. Member.

The institution also revised its growth forecast, in the same direction as economists and other financial market analysts. In IFI’s calculations, GDP is expected to advance by 0.5% in 2022, after growth of 4.6% this year.

Previously, the agency’s forecast was that the Brazilian economy would advance 4.9% in 2021 and 1.7% next year.