Writs of payment until 2026 threaten multi-year plan and raises idea of new rollover
Paulo Guedes — Foto: Marcelo Camargo/Agência Brasil
The snowball created with the constitutional amendment that limited the payment of government court-ordered debts, known as “precatórios”, has brought an additional challenge to the preparation of the multi-year plan (PPA), which will be presented by the federal government to Congress by the end of this month. Valor has learned that the Ministry of Planning and Budget had to present to other ministries a monetary benchmark for discretionary spending in 2027 foreseeing two scenarios.
The first one was made considering the current rule, i.e. that the annual limit for payment of “precatórios” will end in 2026 and that, in 2027, the debt, including the stock, will have to be paid in full by the federal government.
In this scenario, the ministries were left with a budget for discretionary expenses equal to zero, that is, they were left without resources for investment and costs of the public machine. This is because the court-ordered debts estimated by the National Treasury to be paid in 2027 is R$199.99 billion, an amount that would consume the space of non-mandatory expenses of the Budget.
As leaving the ministries without funds is unfeasible from a management point of view, the Ministry of Planning has outlined a second scenario for 2027, in which it considers that there will be a change in the constitutional amendment to prevent judicial debts from compressing discretionary spending. This second scenario considers that the amount to be paid in court-ordered debt in 2027 will be based on the amount paid in 2026, not including the liabilities to be paid. In this way, ministries will be able to have funds to use in their projects.
The imbroglio is yet another sign from the government that the issue of the “precatórios” snowball will have to be faced until the end of this Lula administration, so as not to make the Budget unfeasible in 2027. A similar warning had already been made by the Treasury itself in its Fiscal Projections Report for the first half of this year.
“If there is no change in the current rules, the payment of this liability [of unpaid court orders from 2022 to 2026] should again be subject to the expenditure limit, compressing the space for the execution of discretionary expenses,” wrote the Treasury.
The secretariat calculated that the liability for unpaid court-ordered debt was R$21.9 billion in 2022 and estimated that the total amount until 2027 will reach R$199.99 billion, considering that there will be no early payment of court-ordered debt with a discount or its use in setoff operations – which was proposed by the Bolsonaro administration, but practically discarded by the Lula administration.
For this reason, the Treasury suggested in the report that the liability with the “precatórios” be removed from the expenditure limit subject to the new fiscal framework, so as not to jeopardize discretionary spending in 2027. “Due to the significant impact in 2027 and beyond, it is assumed that there will be future exceptionalization of this expenditure from the spending limit from 2027 onwards.”
Valor has learned the Ministry of Finance is already discussing a solution internally, however, there is still no decision, as there are other more urgent issues to be faced first.
The annual limit for the payment of court-ordered debts was proposed by the Bolsonaro administration and approved by Congress in 2021. The objective was to allow the payment of social security benefits and make room in the 2022 Budget for the campaign promises of former President Jair Bolsonaro, who was a candidate for re-election.
At the time, Paulo Guedes, the then minister of Economy, defended the measure, saying that the volume of “precatórios” to be paid was a “meteor” that would make the 2022 Budget unfeasible. However, he ended up rolling the debt over.
While analyzing a representation on the subject, the Federal Court of Accounts (TCU) recognized the fiscal risks of the constitutional amendment that limited the payment of court-ordered debt. According to the TCU, the limit helps reduce spending in the short term, but increases pressure on the budget in the medium term.
The court recommended that the government take steps to prepare annual estimates of total liabilities, indicating compensatory measures to maintain fiscal balance.
*Por Jéssica Sant’Ana — Brasília
Source: Valor International