Brazil eases spending block and improves 2026 deficit view

By Bernardo Caram

BRASILIA, ‌July 24 (Reuters) - ​The ​Brazilian government on Friday reduced by 5.7 billion reais ($1.12 billion) the spending block needed to ‌comply with an expenditure growth cap from its ⁠fiscal framework, as it cut the projection for some mandatory ‌expenditures.

In its bimonthly revenue and ‌expenditure report, the finance and planning ministries slashed the spending block to 17.9 billion reais from two ​months ago, as projections for personnel, pension and social benefits outlays were revised downward.

The government also ⁠estimated a primary budget deficit of 52 billion reais this year, compared ​with a 60.3 billion reais shortfall seen in May.

The projected primary deficit corresponds to 0.38% ​of gross domestic product (GDP), versus ‌a full-year target of 0.25% of GDP primary surplus.

Under Brazil's budget rules, however, the ⁠government can exclude certain expenditures, most notably part of its large stock of court-ordered payments, when measuring compliance with ⁠the fiscal target.

After these adjustments, the government now expects to post ​a primary surplus of 10.8 billion reais, up from a prior estimate of 4.1 billion reais. The surplus, equivalent to ‌a 0.08% of GDP, is consistent with the fiscal goal, which allows a tolerance ‌band of 0.25% of GDP in either direction.

($1 = 5.0714 ⁠reais)

(Reporting by Bernardo Caram ‌in Brasilia; additional ​reporting and writing by Andre Romani in Sao Paulo; editing by Chris Reese and Natalia ‌Siniawski)

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