Almost all of the growth in public spending next year will be committed to mandatory expenses. According to the 2025 Budget bill, sent to Congress on Friday (30) and detailed this Monday (2), of the R$143.9 billion in additional spending next year, only R$11.7 billion (8.13%) will be left for discretionary (non-mandatory) spending, such as investments (public works) and new programs.
The remaining R$132.2 billion (91.87%) will cover mandatory expenses, of which the largest portion, R$71.1 billion, is earmarked for Social Security. In second place are personnel expenses, up R$36.5 billion. In third place are mandatory expenses for flow control (a category that includes social programs and the minimum wages for health and education), up R$11.3 billion.
In an interview to detail the 2025 Budget project, the deputy secretary of the Federal Budget, Clayton Montes, acknowledged that the space for discretionary spending is tight. “The Budget is the art of distributing scarce resources with existing revenues. Our intention is to try to reverse this issue with the spending review,” declared the secretary. In addition to investments, discretionary spending includes expenses for the maintenance of public services, such as electricity, water, internet, office supplies and cleaning supplies for federal agencies.
Completing the list of mandatory spending increases are the Continuous Benefit Payment (BPC), with R$6.6 billion, and unemployment benefits and insurance, with R$6.5 billion. In the case of Bolsa Família and BPC, the impact could be greater. Last week, the government announced that these programs are included in next year’s spending review plan.
Regarding Bolsa Família, the budget for the program fell from R$169.5 billion to R$167.2 billion. Last week, the government explained that it intends to reduce the allocation to 2023 levels by reviewing registrations and combating fraud. The government intends to save R$6.4 billion with BPC: R$4.3 billion by updating the Single Registry for Social Programs of the Federal Government (CadÚnico) and R$2.1 billion by reassessing expert reports.
The fiscal framework limits the growth of federal spending to 2.5% above inflation in 2025 Originally, the rules limited the increase in spending to 70% of the increase in revenue above inflation in the previous year. Since the budget proposal foresees a growth of 5.78% in revenue above inflation next year, the real increase in spending, when applying the percentage of 70% of the growth in revenue, would in theory be 4.04%.
The fiscal framework, however, has another spending limit, which restricts spending growth above inflation, within a band between 0.6% and 2.5%. Thus, the Union will only be able to spend 2.5% above inflation next year.
