O Jair Bolsonaro government sent to National Congress this tuesday the 2022 budget, year of presidential elections. The piece does not foresee an increase in expenses Family allowance, although the president wants to readjust the average amount of the benefit, which will be renamed Brazil Aid, and that still depends on the approval of deputies and senators.
The Budget was sent without an increase in the Bolsa Família due to lack of space in the spending ceiling — a rule that prevents the Union’s expenditure from growing above the previous year’s inflation. The forecast is to spend R$ 34.7 billion on the program, the same amount this year. This resource is enough to serve 14.7 million families.
As for the minimum wage, the proposal provides for a 6.2% readjustment for next year, which would raise the value to R$ 1,169.
The Budget foresees expenditures of R$ 89.1 billion for precatory (expenses arising from court decisions). The amount was included, despite the government negotiating a way to reduce this amount for 2022. According to the Ministry of Economy, the Budget will be updated when a solution for the court orders is found.
The increase in spending on court rulings limits other expenses due to the spending ceiling. This rule prevents the Union’s expenditure from growing above inflation. When one expense grows above inflation, another needs to be reduced.
With that, the budget piece foresees a total of R$ 98.6 billion for the free expenses of the Union, such as expenses with maintenance of the public machine (against R$ 96 billion in this year’s proposal). This represents only 6% of the entire Budget. The rest is being consumed by mandatory expenses, such as pensions.
The estimate is R$ 23.7 billion in total investments, against R$ 28.6 billion in 2021.
“The growth in the payment of these court rulings inevitably generates a compression of discretionary spending – especially investments – by the Union, so that the current tax rules are respected. The situation can affect the financing of final public policies and put the operational capacity of federal agencies and entities at risk, since a significant part of discretionary expenditures are essential expenses for the functioning of any structures that implement and support such policies”, says the Ministry of Economy.
The government sent to Congress a Proposal for Amendment to the Constitution (PEC) to parcel out the court orders, but the text was poorly received. Given the difficulties, the solution now is to seek an understanding in court in favor of creating a ceiling for court orders.
The solution being designed would pass through the National Council of Justice (CNJ), chaired by Minister Luiz Fux, who is also president of the Supreme Court.
The idea discussed at the CNJ is to establish an annual limit for the payment of court orders, corrected for inflation, to provide predictability to the federal government’s budget. This could reduce, from the current R$89 billion, to around R$39.9 billion, the total value of court-ordered debts that the federal government will have to pay in 2022.
Next year’s Budget foresees a deficit of R$49.6 billion, well below the official authorization by Congress (R$170 billion), due to the increase in tax collection. The government will wait for the best political moment to propose a formal change in the target.
This improvement was made possible by the increase in tax collection, caused by economic growth and inflation.
“The primary result projected for 2022 in this PLOA makes evident the benefits of the new fiscal regime (spending ceiling) which, from the control of expenditures, translates the increase in revenue into better fiscal results, with reflection on the indebtedness of the General Government and on medium-term expectations in relation to public accounts”, says the folder.
The budget piece foresees a total of R$ 1.646 trillion in spending by the Union. Of this total, R$ 765.5 billion will be for Social Security (INSS pensions); R$342.7 billion for spending on public servants.
The text does not consider privatization revenues, but forecasts dividend revenues at R$ 26.2 billion.
The Ministry of Economy took advantage of the release of the Budget to defend the spending ceiling. He claims that the rule, in addition to reducing risk premiums, reduced the trajectory of the primary result, rapidly converging towards the return of the primary surplus.
“Such evidence helps to reinforce the importance of this rule for the fiscal consolidation process, which is the basis for the Brazilian economy to have an environment of lower interest rates and, therefore, incentives for more investment and job creation, pillars for sustainable growth” , says the text.
- Go beyond the basics and stay on top of key economic analyses. Sign the EXAM.