The Independent Fiscal Institution (IFI), the Brazilian Senate's fiscal watchdog, projected on Thursday (Sept. 17) a primary deficit of R$ 86.1 billion in central government accounts for 2027. The estimate, published in the IFI's September Fiscal Monitoring Report, clashes with the budget bill sent to Congress in late August, which forecasts a surplus of R$ 18.6 billion for next year. The gap between the two projections reaches R$ 104.8 billion.
A primary deficit means the government spends more than it collects before interest payments. The government's target for 2027 is a primary surplus of R$ 73.2 billion, or 0.5% of GDP. Under Brazil's fiscal rules, known as the fiscal framework, the result can slide to a deficit of up to R$ 28.1 billion without a formal breach, because a tolerance band and R$ 64.7 billion in spending kept outside the expenditure limit widen the allowed margin. If the IFI scenario holds, the 2027 target will be missed without additional spending cuts, the Senate body said.
"In this situation, the IFI points to the need for a contingency [spending freeze] of R$ 35.7 billion to meet the target next year. This is without counting the new expense of R$ 33.8 billion for the State Compensation Fund, linked to the replacement of the IPI tax by the Selective Tax under the tax reform. Although this expense is not counted in the spending cap, it affects compliance with the primary result target," the report says.
Where the estimates diverge
The IFI blames the gap first on macroeconomic assumptions. The 2027 budget bill assumes GDP growth of 2.5%; the IFI forecasts 1.8%, and the Focus survey, the Central Bank's weekly poll of market analysts, sees 1.5%. "This has deep implications for the sizing of public revenues," the body said.
Other disagreements follow. The government projects payroll growth of 10.1% in 2027, against 7.3% by the IFI. The watchdog also flags R$ 42 billion in expected revenue from a new Selective Tax on goods such as cigarettes and alcohol, listed in the budget as a conditional source even though the bill creating the tax has not been sent to Congress. "The IFI believes the numbers in the budget proposal are relatively optimistic. For its part, the government trusts its spending review strategy," the report adds. The projection was calculated before Thursday's 15.04% increase in the Bolsa Familia welfare payment, which the Planning Ministry says will cost R$ 22.7 billion in 2027.
Rising debt
The IFI's own data show gross public debt climbing from 82.5% of GDP this year to 86.4% in 2027. Even if the fiscal target is met, the report says, "the reality will be very far from the fiscal result needed to stabilize the debt-to-GDP ratio". Congress has yet to start reviewing the 2027 budget bill. According to G1, the text is expected to be taken up only after the electoral period, and budget votes usually happen in December. The first round of Brazil's presidential election is less than three weeks away.