Tax Crisis and Conflict between Cutting Down and Spending Are Challenges in 2021

Record debt and pressure on the ceiling compromise actions aimed at controlling the impacts of the pandemic on both the country's health and economy


In a government filled with internal differences, with the economic team and the political and military wings placed on opposite sides, when it comes to the size of public spending, 2021 promises to be a year of a dispute over the Treasury's limited resources.

With a budget of around R$ 1.5 trillion, the government will be at liberty to manage less than R$ 100 billion. These are the so-called discretionary expenditures, which include investments and expenses for the maintenance of the public sector.

The remainder is designated funds, such as funds for the payment of the salary of civil servants and social security benefits.

Brazil has not generated a fiscal surplus since 2014, which means that the government has been spending more than it has collected (already disregarded the public debt interest expenditure).

The gap in the accounts will reach an unprecedented level in 2021 due to the pandemic. Only with emergency measures to control the health crisis, expenses reached about R$ 600 billion, which should lead the primary result of the year to a deficit of R$ 844 billion, according to the official estimate.

Translated by Cassy Dias

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