R$ 40 billion (about US$ 7.5 billion). That is the extra hole that measures announced during the campaign are expected to open in Brazil's 2027 budget, according to the Independent Fiscal Institution (IFI), a watchdog linked to the Senate. The amount works out to roughly R$ 200 per Brazilian and explains the pressure on the incoming administration to cut spending or raise taxes.

It was against this backdrop that National Treasury secretary Daniel Leal confirmed on Thursday (29) that the economic team is already working on a package of measures for the fourth term of President Luiz Inácio Lula da Silva (PT), reelected on Sunday (25) to govern from 2027 to 2030. According to G1, the outlet that reported his remarks, Leal said the package includes actions to rebalance public accounts and will be presented in due course by the Finance Minister and Lula himself, with no set date.

The secretary denied, however, that any decision has been made to charge IOF, a federal tax on financial transactions, on so-called "exempt bonds" such as LCI and LCA, popular bank-issued savings instruments that currently pay no income tax. "Talks with higher levels do happen; they always happen on recurring topics. But the notion that the government is studying taxing these instruments with IOF, there is no measure ready to be implemented," he said.

What IOF is and what is at stake

IOF stands for Tax on Financial Operations, a federal levy on credit, foreign exchange, insurance and some investments. LCI and LCA are bonds banks issue to fund real estate and agribusiness, and by law their returns are exempt from income tax, which makes them a favorite of Brazilian savers. If the exemption is reviewed, the final return for the saver falls.

The size of the bill explains why the topic is back. The IFI projects a deficit of 0.5% of GDP this year and sees the gap potentially reaching 1% of GDP in 2027, which would require an adjustment of about 3 percentage points of GDP to stabilize public debt. In practice, without an adjustment, interest rates tend to stay high for longer, raising the cost of mortgages and installment credit for ordinary families.

Analysts heard by G1 say the recurring fiscal deficits of recent years push interest rates up and increase the cost of servicing public debt. The IFI, in turn, urged the government to announce "as soon as possible" a plan for the next four years and to name who will run the Finance Ministry, as a way to calm investors after the market turmoil that followed the election.