Fiscal framework: check the main points of the text approved by the Chamber of Deputies

Rapporteur of the bill, federal deputy Claudio Cajado (PP-BA) made some changes to the text that the Ministry of Finance sent in April. It included prohibitions or “triggers” to force the contingency (blocking) of resources, in case the government does not meet the primary result targets, but left out of the rules the real increase in the minimum wage, which could rise above inflation under any circumstances. .

Cajado said that he sought to ensure in the text a balance for the adjustment of public accounts that contemplated the government and also those most critical of the project. He celebrated the approval of the project.

“It reflects the broad majority of the Chamber, the broad support. It is a text that remains consensual, maintaining the great success that was the debate, constructive criticism, suggestions and the active participation of the college of leaders, President Lira and the government” .

Main points

The project creates a tolerance interval or, as the government has called it, variation bands for the primary result target. The primary result is the difference between what the government collects and spends, excluding the payment of interest on the debt.

According to the text, the primary result target will be considered met even if it varies 0.25% downwards or upwards. For example: for next year, the government estimates a primary result of 0% of GDP. This means that the expectation is for expenses and expenses of the same size. However, if the result is between – 0.25% of GDP (lower band) and 0.25% of GDP (upper band), it will be within the target and, therefore, considered fulfilled.

In 2025, for example, the target is a surplus (accounts in blue) of 0.5% of GDP. The final result may vary between 0.25% (lower band) and 0.75% of GDP (upper band). For 2026, the government expects a surplus equivalent to 1% of GDP, with the lower band set at 0.75% and the upper band at 1.25%.

If it meets the primary result target, the government will be able to increase its spending by up to 70% of the revenue growth obtained in the previous 12 months. That is, if what the government collects from taxes, fees and other sources of revenue increases by R$ 10 billion, the following year it can increase expenditures by a maximum of 70%, that is, R$ 7 billion.

If the balance of public accounts remains below the lower band of the target, the following year the government will only be able to increase expenditure by 50% of revenue growth and no longer by 70%. On the other hand, in a scenario where the result of public accounts is above the upper band of the target, the Executive may allocate up to 70% of the surplus for investments, with priorities for unfinished works or works in progress.

The text also proposes that, regardless of what it collects, the government will be able to spend between 0.6% and 2.5% more than in the previous year, not counting inflation. The spending cap, which will be replaced by the fiscal framework, limited expenditure growth to zero, in practice.

Federal deputy Kim Kataguiri (União-SP) criticized the floor for real growth in expenses. “Obliging citizens to pay the government’s bill even when the economy is going bad is to increase debt, is to increase taxes”.

fit measurements
The rapporteur added some adjustment measures, also known as prohibitions or “triggers”, for situations in which the government does not meet the primary result target.

Assume a scenario in which the Executive does not reach the primary result target in 2023. Under the framework proposed by the Ministry of Finance, in 2024 the government could only increase expenditures by 50% of revenue growth and not by 70%, if it complies with the goal. But, in addition to this punishment, Cajado proposed that, in the first year of non-compliance, the Executive be prevented from:

• Create positions, jobs or functions that imply an increase in expenses;
• Change the career structure that generates expense growth;
• Create or increase aid, such as Bolsa Família, advantages and benefits of any nature;
• Create mandatory expense;
• Take a measure that implies a mandatory readjustment of expenses above the inflation variation (with the exception of the minimum wage, which may increase above the IPCA);
• Create or expand programs and lines of financing, remission, renegotiation or refinancing of debts that generate expansion of subsidies and grants;
• Grant or expand tax incentives or benefits.

Triggers are valid for one year. If in the following year the primary result target is reached, the measures automatically cease to be valid. The text also provides that the President of the Republic may propose to the National Congress the partial suspension or gradation of the adjustment measures, “demonstrating that the impact and duration of the measures adopted will be sufficient to correct the deviation”.

If the government does not meet the primary result target for the second consecutive year, other prohibitions will be added, such as the granting of increases and readjustments in personnel expenses; admission or hiring of personnel, except in the case of replacement of vacant positions and holding of a public tender, with the exception of replacement of vacant positions.

The text sent by the government made the contingency of resources optional in case of non-compliance with the goal, but Cajado made the measure mandatory in the bill. In addition, the revenue and expenditure assessment reports should be published bimonthly, as is currently the case, and not quarterly, as proposed by the Ministry of Finance.

Before the text was voted in plenary, Cajado excluded a loophole that allowed the government to increase spending by 2.5% above inflation in the year 2024, regardless of revenue. check out here.