Brazil readies new 2025 fiscal target of 0.1% primary surplus, sources say

By Thomson Reuters Apr 12, 2024 | 5:35 PM

By Marcela Ayres and Bernardo Caram

BRASILIA (Reuters) – Brazil’s government is preparing a new fiscal target for next year, aiming for a primary surplus equal to 0.1% of gross domestic product (GDP), two sources with direct knowledge of the matter told Reuters on Friday.

Speaking on condition of anonymity because the discussions are private, the sources said there was no final decision, but the government intended to loosen the target from the 2025 surplus of 0.5% of GDP it had suggested last year.

The government will set the new target in the budget guidelines bill, which must be sent to Congress by April 15. The Planning and Finance ministries said on Friday they had postponed the bill’s presentation to the press to Monday at 4:30 PM local time, shifting from an earlier morning announcement.

The ministries did not immediately respond to a request for comment.

According to both sources, the government is also expected to indicate that a primary surplus of 1% of GDP, previously projected to be achieved in 2026, will now be postponed to 2028.

In practice, this extension will imply a longer period for stabilizing Brazil’s growing public debt. Considered the country’s primary solvency indicator, the gross debt rose to 75.5% of GDP in February, up from 71.8% a year earlier.

Government officials had already suggested this week that the target should be relaxed, stressing the government would still seek an improvement compared to the official goal of eliminating the primary deficit this year.

When President Luiz Inacio Lula da Silva introduced a fresh fiscal framework last year, constraining spending growth to 70% of revenue increases while permitting a minimum expansion of 0.6% and a maximum of 2.5% above inflation annually, it mandated the ongoing pursuit of primary budget targets alongside these regulations.

The left-wing government also established a range for achieving the fiscal target, which, starting this year, has a tolerance margin of one-quarter of a percentage point on either side.

(Reporting by Marcela Ayres and Bernardo Caram; Editing by Brad Haynes, Chizu Nomiyama and Steven Grattan and Marguerita Choy)