The Central Government accounts — National Treasury, Central Bank and Social Security — recorded a primary surplus of R$36.5 billion in October, the National Treasury reported this Wednesday (26). Overcoming the expectations, the result is the fourth best for the month in the historical series, starting in 1997.
According to the Prisma Fiscal survey, a survey of financial institutions published by the Ministry of Finance, analysts estimated a primary surplus of R$32.2 billion in October. As it is the beginning of the quarter, when tax payments by financial institutions are concentrated, October usually records surpluses.
Despite the positive result, the balance was below that observed in the same month of 2024, when the surplus was R$41 billion, in values updated for inflation. The primary result represents the difference between Central Government revenues and expenses, without interest on public debt.
From January to October, the government has a primary deficit of R$63.7 billion, which maintains pressure on meeting the fiscal target. For this year, the Budgetary Guidelines Law (LDO) stipulates a zero deficit target, with a tolerance margin of 0.25 percentage points of the Gross Domestic Product (GDP), which allows for a deficit of up to R$31 billion.
The negative result of up to R$31 billion, however, excludes extraordinary expenses, such as court orders and the reimbursement of retirees and pensioners affected by fraud at the National Social Security Institute (INSS).
Record fundraising
The performance of public accounts in October was driven by revenue record in Octoberespecially Income Tax (IR) and Tax on Financial Operations (IOF).
In the case of IR, the increase reflected the growth in the wage bill, linked to employment growth, and the income from fixed income investments, stimulated by high interest rates. In the case of the IOF, the increase reflects the decree that raised the tax, reestablished by the Federal Supreme Court (STF), after being overturned by Congress.
Expenses
Despite the increase in revenue, October’s primary result was accompanied by a sharp increase in expenses. They rose 9.2% above inflation compared to October last year, mainly influenced by Social Security, health expenses and the payment of court orders.
Main numbers for October:
- Primary surplus: R$36.5 billion
- Surplus in October 2024: R$41 billion
- Net revenue: R$228.9 billion (+4.5% in real terms)
- Total expenses: R$192.4 billion (+9.2% in real terms)
- Treasury result: surplus of R$57.4 billion
- Social Security Result: deficit of R$20.7 billion
- Central Bank result: deficit of R$152 million
Year to date (January and October):
- Primary deficit: R$63.7 billion
- Deficit in the same period of 2024: R$62.5 billion
- Net revenue: R$1.915 trillion (+3.7% above inflation)
- Total expenses: R$1.979 trillion (+3.3% above inflation)
- Investments: R$62.59 billion (+2.6% above inflation)
- Deficit in 12 months: R$41.9 billion (0.35% of GDP)
What brought the recipes:
- Income Tax: +R$4.6 billion
- IOF: +R$ 2.3 billion
- Revenues administered by the Federal Revenue Service: +5.5% above inflation
- Dividends from state-owned companies: R$2.8 billion in October, no dividends expected in the same month of 2024.
The IOF was boosted by recent changes in legislation, especially in currency and business credit operations.
What increased expenses:
- Health: +R$6.3 billion
- Social security benefits: +R$2.4 billion
- Court orders and court decisions: +R$ 1.5 billion
- Supplementation to Fundef/Fundeb: +R$ 1.3 billion
- Public investments: R$7.6 billion in October (+27.7% above inflation)
The growth in Social Security expenses was influenced by the real adjustment of the minimum wage and the increase in the number of beneficiaries.
Fiscal target
Despite the surplus in October, the result for the year is still far from the zero deficit target defined by the fiscal framework.
Allowed margins:
Tolerance: deficit of up to 0.25% of GDP, around R$31 billion, according to the fiscal framework
Exclusion from the target: up to R$44.5 billion in court orders (government debts with a final court ruling) and expenses for compensation for INSS fraud
Deficit without failing to meet the framework target: up to R$75.8 billion
Worrying situation
Even so, the situation is worrying. The government projects a deficit of R$75.7 billion in 2025, at the limit of the band. Federal state-owned companies record an expected loss of R$9.2 billion, above the LDO target.
The projection for the deficit of state-owned companies was worsened with the inclusion of R$ 3.3 billion in losses at Correios, which made the government contingency R$3.3 billion last Friday (21) .
To meet the fiscal target of a deficit of up to R$31.5 billion, the government set aside R$3.3 billion and keeps R$7.7 billion blocked in total. The block is adopted when expected expenses exceed the limit imposed by the fiscal framework. Contingency is applied when there is revenue frustration and risk of non-compliance with the fiscal target.
