BRASILIA, April 15 (Reuters) – Brazil’s government will count 39.4% of court-ordered debt payments due in 2027 within its fiscal target, budget guidelines submitted to Congress on Wednesday showed, exceeding the minimum required under a constitutional change approved last year.
The amendment allowed the government to include at least 10% of those payments, stemming from final rulings against the federal government, within fiscal targets.
By counting a larger share, President Luiz Inacio Lula da Silva’s administration brings the effective primary balance closer to the headline goal, as most of these hefty payments have been kept outside fiscal rules in recent years.
“Even though we could have worked with 90% of the court-ordered debt payments outside the target, we decided to maintain the same nominal amount as in 2026,” Brazilian Planning Minister Bruno Moretti said at a press conference.
In the budget guidelines bill, the government proposed a primary surplus target of 0.5% of gross domestic product (GDP) for 2027.
However, with 60.6% of court-ordered payments – or about 57.8 billion reais ($11.58 billion) – still projected to be paid outside the fiscal target, the effective primary result would amount to a surplus of around 0.1% of GDP.
For this year, the government is targeting a primary surplus of 0.25% of GDP, but expects an effective primary deficit of 0.4% of GDP, largely due to court-ordered payments made outside fiscal rules.
The 2027 bill assumes GDP growth of 2.56% and inflation of 3.04% next year.
PROJECTIONS THROUGH 2030
The government also reaffirmed medium-term fiscal projections, maintaining its estimate of a primary surplus of 1.0% of GDP in 2028 and 1.25% in 2029, and setting a surplus target of 1.5% for 2030 for the first time.
Adjusted for the expected share of court-ordered payments kept outside fiscal rules, the effective primary surpluses would fall to 0.6% of GDP in 2028, 0.9% in 2029 and 1.3% in 2030.
The government also forecast that gross public debt, seen as the country’s main indicator of fiscal solvency, will reach 83.6% of GDP this year, unchanged from projections made in January. This marks an increase of 11.9 percentage points under Lula, who is seeking reelection.
Gross debt is expected to rise further to 86.0% of GDP next year, peaking at 87.8% in 2029. Earlier this year, the government had projected a higher peak of 88.6% of GDP in 2032.
“This trajectory shows our fiscal targets are compatible with debt stabilization,” Finance Ministry Executive Secretary Rogerio Ceron said, noting debt is projected to fall to 83.4% of GDP by 2036, the final year of the government’s fresh estimates.
($1 = 4.9914 reais)
(Reporting by Marcela Ayres in Brasilia; Editing by Matthew Lewis)
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