At a time of change in the economic team, the National Treasury Secretariat issued today (16) a warning about the impact of the Proposed Amendment to the Constitution (PEC) of the Transition on the government’s indebtedness. In a report published today (16), the agency calls for cutting expenses or raising taxes to prevent the gross public debt from exceeding 80% of the Gross Domestic Product (GDP, sum of the wealth produced in the country) in the medium term.
According to Treasury calculations, the text approved by the Senate has an impact of R$ 193.7 billion in 2023, raising the gross public debt to 81.6% of GDP in 2026. Without the approval of the PEC, the indicator would continue to rise, but to a lesser extent, reaching 79.1% of GDP over the same period. For this year, the National Treasury estimates that gross public debt will reach 73.7% of GDP.
The estimates are contained in the Fiscal Projections Report, a document with medium and long-term forecasts for the economy. This is the second edition of the report, released for the first time in June this year.
Analysis scenarios
The report built several analysis scenarios. In the baseline scenario, the spending ceiling would be maintained in the current design, with a single increase of BRL 100 billion in 2023 (maintained in subsequent years) to accommodate Bolsa Família. In the reference scenario, it maintains the withdrawal of Bolsa Família from the ceiling and adds expenditures of BRL 120.3 billion in funding and investments (at 2023 prices), with some easing of the expenditure ceiling.
Based on the reference scenario, the Treasury projects that the country will continue to have primary deficits – negative results without public debt interest – until 2027, with an exception in 2026. With these assumptions, the gross debt would rise from 73.7% of the GDP in 2022 to 80.2% in 2027 and would drop to 77.6% in 2031. With readjustments for civil servants, increases in the minimum wage above inflation and the inclusion of beneficiaries in Bolsa Família, the impact would be greater, but that was not calculated by the Treasury.
With these parameters, the Treasury calls for spending cuts on other mandatory expenses, to avoid compressing discretionary expenses, not mandatory, but essential for the maintenance of public services because they include items such as electricity, water, telephone, internet and office supplies.
“This reinforces the importance that the increase in the pace of growth of mandatory expenses is offset by the reduction of other expenses, so that discretionary expenses are not excessively compressed and so that it is possible to comply with fiscal rules”, says the Treasury.
redesign
The report presented a simulation, according to which the government could save up to R$ 26 billion with a reformulation of Bolsa Família. Instead of paying a minimum amount of BRL 600 per family, regardless of the number of members, payment would be based on a minimum per capita amount (to each family member).
According to the Treasury, the average amount paid by Auxílio Brasil is 170% higher than that recorded in November 2021, the last month in which Bolsa Família paid in its original format. By applying this 170% variation to the expenditure in November last year, the Treasury estimates that expenditure on social programs would total BRL 133 billion per year if the per capita payment were maintained, against BRL 159 billion registered with the Auxílio Brasil .
