Goiás became today (24) the second state to adhere to the Tax Recovery Regime (RRF), which allows the refinancing of local government debts in exchange for a cost-cutting plan. The state’s adhesion was signed recently by President Jair Bolsonaro, in a ceremony at the Palácio da Alvorada, with the presence of Governor Ronaldo Caiado (DEM).
Until now, the only state registered in the RRF was Rio de Janeiro, which signed the plan in 2017. In May of this year, the Federal Supreme Court (STF) had authorized the government of Goiás to adhere to the RRF. At the time, the court authorized the suspension of payment of debts for up to 18 months, with the adoption of a state spending ceiling.
Upon signing the document, Bolsonaro said that the Tax Recovery Regime will result in the release of funds for the government of Goiás. “In addition to predictability, the state now has more means to meet the interests of the population as a whole,” he declared.
Governor Ronaldo Caiado classified the measure as a “Christmas gift” to the 7.2 million inhabitants of Goiás. He admitted the possibility of adjustments for the local civil servants, after years of late payments to civil servants, as the state rebalances the finance. “The more the government recovers in the fiscal framework, adjustments will also be made”, said the governor.
fiscal adjustment
Existing since the end of 2016, the Tax Recovery Regime allows the suspension of payment of debts of a defaulting state with the Federal Government in exchange for fiscal adjustment measures. In the case of Goiás, payment of the state public debt will be partially suspended in 2022, releasing R$ 445 million for local investments, according to the State’s Department of Communication.
The debt will be paid back gradually from 2023, for a period of 30 years. The resumption of installments will be gradual, with the payment of approximately BRL 738 million in 2023, BRL 1.03 billion in 2024, gradually increasing until reaching BRL 2 billion per year from 2027.
In exchange for the debt renegotiation, the state will have to implement some measures that will save R$ 8 billion in expenditures in the first six years of the plan. The main measure is the cut in tax incentives, which should boost the state’s cash flow by just over R$ 3 billion. The base date for local civil servants will be suspended, but adjustments may be granted, as the state’s fiscal situation improves.
The RRF has a term of nine years, but, according to the Goiás government, the state may rebalance the accounts in 2027, with the possibility of requesting an early exit from the regime if the balance is reached earlier.
Currently, Goiás has an accumulated debt of R$ 22.986 billion, which consumes R$ 2.5 billion per year in payment of principal, interest and court orders.
