The payment of precatories and an agreement closed with the São Paulo city hall made the public accounts register, in August, the second largest primary deficit in the historical series. Last month, the Central Government – National Treasury, Social Security and Central Bank – registered a primary deficit of R$ 49.972 billion, announced today (29) the National Treasury.
This is the second largest deficit for the month since the beginning of the historical series, only losing to August 2020, at the height of the covid-19 pandemic. The result came worse than expected by financial institutions. According to the Prisma Fiscal survey, released every month by the Ministry of Economy, market analysts had expected a negative result of R$14.6 billion in August.
This was the first time that the Central Government registered a primary deficit after positive results in June and July. With the August result, the Central Government closed the first eight months of the year with a positive result of R$ 22.151 billion. This is also the best result for the period since the beginning of the historical series.
The primary result represents the difference between revenues and expenditures, disregarding interest payments on the public debt. Despite the August deficit, the economic team estimates that the Central Government will close the year with a surplus of R$13.548 billion, the first positive annual result since 2013.
The surplus forecast occurs even with the constitutional amendment that will increase social spending by R$ 41.25 billion in the second half and with the exemptions of R$ 71.56 billion that came into force in 2022. The estimate was released last week, in the Bimonthly Income and Expenditure Assessment Report.
record spending
The August deficit occurred because spending was pressured by two atypical factors. The first was the payment of R$ 23.9 billion referring to the agreement that extinguished the debt of around R$ 24 billion of the São Paulo City Hall with the Union in exchange for the extinction of the lawsuit that questions the control of Campo de Marte airport, in the capital of São Paulo.
Last week, the Ministry of Economy announced that the Central Government would end the year with a primary surplus of R$ 37.5 billion, if it were not for the Campo de Marte agreement.
The second factor was the payment of precatories, government debts determined by a final court decision. Last month, the government paid BRL 13.3 billion more in Social Security, BRL 6.1 billion more in expenses with civil servants and BRL 6.2 billion more in court sentences and precatories in general. This was because, by decision of the National Council of Justice, the payment of precatories, which traditionally takes place in June, this year was postponed to August.
Revenues
With these additional payments, expenses grew more than revenues in August compared to the same month last year. In the last month, net revenues grew 17.5% in relation to August of last year in nominal values. Discounting inflation by the Broad National Consumer Price Index (IPCA), growth reached 8%. In the same period, total expenses rose 48.3% in nominal values and 36.4% after discounting inflation.
Regarding the payment of taxes, there was a growth of R$ 8 billion above inflation in the Income Tax, mainly motivated by the increase in corporate profits. In large part, this rise reflects the rise in profit for energy and oil companies at the beginning of the year, which helps to partially offset the exemptions for industry and fuel.
The rise of oil in the international market made the revenues with royalties grew R$ 1.729 billion (+30.5%) above inflation last month compared to August 2021. Currently, the international barrel price is around US$ 90 because of the war between Russia and Ukraine.
Expenses
On the expenditure side, in addition to atypical factors, spending on social programs increased after the constitutional amendment that increased the value of Auxílio Brasil and created the Taxi and Truck Driver Aids. With Auxílio Brasil alone, the impact of the readjustment of the minimum benefit amount to R$ 600 corresponded to R$ 7.5 billion in August.
In the year, the increase in discretionary (non-mandatory) expenses with flow control reached R$ 39.245 billion (+58.1%) above the IPCA. This category covers social programs such as Auxílio Brasil.
On the other hand, spending on federal employees fell by 7.6% year-to-date, discounting inflation. The drop reflects the wage freeze for civil servants that ran between July 2020 and December 2021 and the lack of readjustments in 2022, despite the fact that several categories are on strike. The postponement of precatories also contributed to the fall.
Regarding investments (public works and purchase of equipment), the federal government invested R$ 26.7 billion in the first eight months of the year. The value represents a drop of 12.5% discounted the IPCA compared to the same period in 2021.
