Brazil’s Government Could See Gas Aid as Tax Expenditure

(Bloomberg) -- Brazil’s Finance Ministry said on Thursday night that the government may treat the increase in the Gas Aid program as a tax expenditure.

In a statement, the ministry said that the bill sent to Congress this week, with an increase in the number of families benefiting from the program, has two possible financing solutions. One of them is via the budget of the Mining and Energy Ministry. The other, which still needs to be regulated, would be as a tax expenditure. In this case, the fiscal impact of the measure would be on revenues and not on primary expenses.

The statement was released amid financial market concerns that the measure may represent an attempt to circumvent the nation’s fiscal framework.

“The bill sent to the National Congress will naturally be subject to the scrutiny of Parliament, the appropriate forum for discussions about the new modality of Gas Aid,” the statement reads.

President Luiz Inacio Lula da Silva announced earlier this week an increase in the number of families benefiting from Gas Aid program, reaching 20 million by 2026. The cost of the program would jump from 3.4 billion reais ($601 million) to 5 billion reais in 2025 and reach 13.6 billion reais in 2026.

Budget

The government has promised that next year’s budget figures, which are due to be presented today, will be credible. There will be no underestimation of spending in the projection for social security expenses in the 2025 budget bill, the National Institute of Social Security President Alessandro Stefanutto said in an interview to Valor Economico.

Finance Minister Fernando Haddad had a similar message earlier in the week. Haddad said he is more comfortable with the 2025 budget than the one from 2024, which, according to him, underestimated ordinary revenues and overestimated extraordinary ones.

The National Treasury intends to increase the estimate for minimum wage in 2025 to 1,509 reais, representing a hike of 6.87% compared to the current level of 1,412 reais, says O Globo.

Galipolo

Lula said in local radio interview on Friday that, if his central bank governor nominee Gabriel Galipolo says he has to raise interest rates, then he’s fine with that. The President of the Republic should have the power to hire and fire central bank governors, and there has to be an explanation for changes in borrowing costs, he said.

Other Highlights

--With assistance from Beatriz Reis.

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