Brazil’s extraordinary revenues, especially in the second half-year, will cause the country’s Central Government—comprising the National Treasury, the Social Security System, and the Central Bank—to close out 2019 with a primary deficit of $19 billion, Economy Minister Paulo Guedes told reporters at the Planalto presidential palace, in Brasília, Monday (Nov. 18). The $33 billion target for the year, however, will remain unchanged.
“From the fiscal viewpoint, 2019 was a year well above expectations,” Guedes stated. The minister talked about the collaboration with the Executive and the Legislative branches, which saw overhauls approved, like the pension reform.
The primary deficit is the negative balance in government accounts with no interest paid for the public debt. The 2020 budget sets a $19.4 billion target for the Central Government. However, Waldery Rodrigues, special secretary for finance, said Central Government accounts are expected to close out next year a lot better than estimated. Even with the 2020 deficit lower than the forecast, Rodrigues said the government will not change its fiscal target for next year.
The resumption of economic activity, which may be seen reflected in future tax collection, justifies the optimistic sentiment for 2020, Rodrigues argued. He also mentioned the anticipation of dividends of state-controlled companies and the outlook concerning the auctions for the transfer of rights to explore the Atapu and Sépia fields, in the area with surplus barrels of pre-salt oil that were not won at the November 6 auction.
Next week, the government will send to Congress a request to change next year’s budget, in order to incorporate the changes submitted this year and revise expenditures to make room for the spending cap. The figures, however, have not been disclosed.
Late last year, Treasury Secretary Ansueto Almeida said retaining the spending cap does not make it necessary to alter the target, as higher government spending would still be blocked.
Considering the distribution of funds from the transfer of rights across the states and municipalities and the payment to Petrobras for the surplus barrels of pre-salt oil, the 2019 budget should close out the year with a $4.3 billion reserve. According to Federal Budget Secretary George Soares, a portion of this reserve will be used to pay extraordinary credits, but most will help lower the primary deficit.