Brazilian government posts worst deficit since 2020

The federal government announced Monday that it recorded a primary deficit of BRL 230.5 billion (USD 46.7 billion) in 2023, a major shift from the BRL 46.4 billion surplus it posted in 2022 and the worst primary result since 2020 — when the pandemic downturn forced governments to open the spending spigot to offset the economic impact of social isolation and business closures.

Finance Ministry data points to an inflation-adjusted decline in revenue of 2.2 percent from 2022, a bigger drop than that estimated by tax authorities, which last week estimated a 0.12 percent decrease. 

The calculated data includes additional sources of revenue not taken into account by the tax authorities, such as income from natural resources and dividends from the government’s stake in companies such as oil giant Petrobras.

Revenue from taxes on personal income rose 9 percent in real terms from 2022, while revenue from the CSLL corporate tax fell 18 percent.

Revenue from dividends dropped by more than 44 percent, largely due to a decrease in money from Petrobras, which paid BRL 30.4 billion less in dividends to the government than in 2022. A drop in international oil prices also affected revenues from natural resources.

Some expenses increased significantly, such as court-ordered repayments (IOU bonds known as precatórios), which rose 291 percent to BRL 71.4 billion.

Overall, expenses increased by 12.5 percent in real terms compared to 2022, to a total of BRL 2.1 trillion (USD 426 billion).

Earlier this month, the Federal Accounts Court, a public spending watchdog, issued a report estimating a primary deficit of BRL 55 billion (USD 11 billion) for 2024, instead of the government meeting its zero-deficit target. 

Officially, the budget law projects revenues to reach 19.2 percent of GDP in 2024, significantly higher than in recent years, which the accounts court says is unfeasible.

The Luiz Inácio Lula da Silva administration has made efforts to increase revenues, with varying degrees of success, including trying to end or limit payroll tax breaks for 17 economic sectors — a debate that is still ongoing, with congressional leaders defending the tax benefit.

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