Aerial view of the Esplanade des Ministères. Photo: Edilson Rodrigues / Agência Senad
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The federal government presented the 2022 Budget, this Tuesday (31), without provision for adjustment of the budget of the Bolsa Família, renamed Auxílio Brasil, and with all the precatoria of the Union – court decisions that are not most likely to appeal, which will total 89.1 billion reais.
The value programmed for Brazil Aid next year is R $ 34.7 billion, slightly less than the R $ 34.9 billion programmed for Bolsa Família in 2021.
In the annual budget bill (PLOA) 2022, which will be assessed in the coming months by the National Congress, the government also plans a 10.7 billion reais increase in resources for health, compared to what had budgeted for 2021 – of this total, 7.1 billion reais will be transferred to ongoing actions to fight the Covid-1 pandemic.
The budget presented on Tuesday also allocates 2 billion reais to carry out the demographic census in 2022.
The primary deficit of the central government is expected to be 49.6 billion reais, according to the PLOA, which is well below the target set in the 2022 budget guidance law (170.5 billion reais).
The main result is the difference between revenue and expenditure, not counting public debt expenditure. The balance will be negative – that is, there will be a primary deficit – for the ninth consecutive year. The good news is that in 2022, this deficit will be smaller than in recent years.
Among the premises of the PLOA is a growth of 2.51% of gross domestic product (GDP) in 2022, lower than what the government itself forecasts for 2021 (5.3%).
The economic team considers that the minimum wage will be readjusted according to inflation, reaching R $ 1,169 in early 2022. There is, however, a possible difficulty. The government predicts that the 2021 INPC – index used to correct the minimum in early 2022 – will be 6.2%. This rate is much lower than that projected by private banks like Itaú and Santander, which expect an INPC of 8.9% and 8.7%, respectively. During the last measurement, in July, the 12-month cumulative INPC was 9.85%.
If the INPC actually increases more than the government anticipates, the readjustment of the minimum wage will also be larger. And because the wage floor is a benchmark for much of the government’s mandatory spending – like social security benefits, unemployment insurance, wage premiums, and continuous cash benefits (GCPs) – spending can be higher than expected. When that happens, the government is forced to cut discretionary, free-choice spending – which in 2022 will be near all-time low, according to the PLOA.
Less room for discretionary spending
With the increase in mandatory spending, caused, among other things, by the increase in court orders, there will be less room for discretionary spending. This year, they are expected to add just under R $ 99.2 billion, according to the latest estimate of federal government spending. For the 2022 budget, the forecast is 98.6 billion reais.
According to the government, the Budget’s commitment to compulsory expenditure goes from 92.7% in 2021 to 94% in 2022. And the discretionary part decreases from 7.3% to 6% of the total.
This ratio was only worse in 2020, when mandatory spending was 94.4% of the budget, compared to just 5.6% of discretionary spending.
There has been a continued deterioration of this image since the middle of the last decade. In 2014, for example, almost 25% of the budget was allocated to free choice spending.
More costs and less investment
There are two main groups of discretionary spending: costs (the money that guarantees the functioning of the public machine, such as payment for electricity, water and other daily expenses) and investments (works, machinery and equipment that will provide some kind of return in the future).
The PLOA 2022 foresees an increase in current expenditure and a reduction in investments, compared to what was foreseen in the 2021 Budget.
Costs increase by 11%, from 67.4 billion BRL in PLOA 2021 to 74.9 billion BRL in 2022. In the same comparison, investments decrease by 17%, from 28.7 billion BRL to 23, 8 billion BRL.
According to the Ministry of the Economy, in this context of reduced investments, priority will be given to those which are in progress. With this, the so-called “projects” will receive 10.1 billion reais, or 42.7% of investments and 10.3% of all discretionary spending. However, this figure is lower than that of 2021, when 11.6 billion reais were programmed for projects, corresponding to 40.6% of investments and 12.1% of discretionary spending.