Brazil’s central govt deficit soars in 2023, marking second-largest ever recorded Reuters via

© Reuters. FILE PHOTO: Brazil’s Finance Minister Fernando Haddad attends a press conference in Brasilia, Brazil December 28, 2023. REUTERS/Adriano Machado/File Photo

BRASILIA (Reuters) – Brazil’s central government posted a primary budget deficit of 230.5 billion reais ($47 billion) in 2023, Treasury data showed on Monday, signaling a steep fiscal deterioration amid rapid expenditure expansion.

The annual deficit, equivalent to 2.1% of the Gross Domestic Product (GDP), reverses a 0.5% GDP surplus in 2022 and represents the second-largest fiscal gap ever recorded by the country, surpassed only by 2020 when the government boosted expenses to combat the Covid pandemic.

The shortfall follows a December primary deficit of 116.1 billion reais, impacted by 92.4 billion reais payments to settle court-ordered payments.

In 2021, former President Jair Bolsonaro’s government enacted a constitutional amendment in Congress to impose an annual cap on court-ordered payments, leading to an unpaid backlog that the administration of President Luiz Inacio Lula da Silva subsequently addressed.

The annual deficit comes on the heels of a 12.5% increase in real terms in expenditures, while the net revenue of the central government, composed of the Treasury, central bank, and Social Security, fell 2.2% during the year.

If the impact of court-ordered payments is excluded, the primary deficit for the year would have been 138.1 billion reais, still exceeding the initially indicated figures by the leftist government, which augmented social spending.

Finance Minister Fernando Haddad took office pledging to achieve a deficit equivalent to 1% of GDP this year, or around 100 billion reais. However, in recent months, he and his team have conceded that this target would no longer be attainable.

In unveiling new fiscal rules, the administration of leftist President Luiz Inacio Lula da Silva projected an even more ambitious deficit of 0.5% of GDP for this year.

($1 = 4.9093 reais)