The Brazilian government has announced that it will include 39.4% of its court-ordered debt payments (known as precatórios) within its formal fiscal target for 2027. This move, detailed in the budget guidelines submitted to Congress, significantly exceeds the legal minimum of 10% required by a recent constitutional amendment.
Key Highlights:
- Exceeding the Minimum: Under the new rules established by Constitutional Amendment 136/2025, the government was only required to count 10% of these judicial debts toward its fiscal target. By choosing to include nearly 40% instead, the Lula administration is signaling a commitment to greater fiscal transparency and a more realistic budget.
- Fiscal Target vs. Reality: The government has proposed a headline primary surplus target of 0.5% of GDP for 2027. However, because 60.6% of these debts (roughly 57.8 billion reais) will still be paid “outside” the official target calculation, the actual effective surplus is expected to be closer to 0.1% of GDP.
- Strategy for Credibility: Planning Minister Bruno Moretti explained that the government decided to maintain the same nominal amount for these payments as in 2026. This strategy is intended to bring the “headline” fiscal goal closer to the “effective” economic reality, reducing the gap between official accounting and actual spending.
- Economic Projections: The 2027 budget guidelines are built on the assumption of 2.56% GDP growth and an inflation rate of 3.04%.
- Future Outlook: The government also set long-term targets, aiming for a primary surplus of 1.0% in 2028, 1.25% in 2029, and reaching 1.5% by 2030. Each of these targets will be adjusted downward in “effective” terms as the remaining court-ordered debts are gradually phased back into the official calculations over the next decade.
This approach reflects the administration’s attempt to manage massive legal liabilities without triggering a fiscal crisis, while slowly moving back toward a standard where all government expenditures are fully accounted for within the national budget.