Brazil Cuts 2026 Deficit Forecast to R$ 52 Billion

What is Brazil's primary deficit forecast for 2026?

Brazil's federal government now projects a primary deficit of R$ 52 billion for 2026, down from the previous estimate of R$ 60.3 billion. The revision was published in the bimonthly Revenue and Expenditure Evaluation Report sent to Congress on Friday, July 24.

Why does the number include precatórios?

Precatórios are court-ordered debt payments owed by the government. Under a 2023 agreement with the Supreme Court (STF), they remain outside the fiscal framework target through this year. When precatórios and other legally excluded items — such as defence, health and education spending — are added in, total off-target spending reaches R$ 62.8 billion, down from R$ 64.4 billion in the previous report.

Is the government actually running a surplus within its fiscal rules?

Yes. Stripping out precatórios and the other exemptions, the government projects a primary surplus of R$ 10.8 billion. Because of this surplus projection, no budget contingency was imposed this cycle.

What happened with the R$ 5.7 billion budget unblock?

The Finance and Planning Ministries released R$ 5.7 billion that had previously been frozen to comply with expenditure limits. As a result, the total blocked portion of the 2026 budget fell from R$ 23.7 billion to R$ 17.9 billion. This unblock is separate from the primary result target.

What are the main revenue and spending shifts?

On the revenue side, net receipts are expected to rise R$ 12.3 billion above the approved budget, driven largely by a R$ 12.7 billion increase in income-tax collection linked to higher inflation following the outbreak of conflict in the Middle East. On the spending side, total outlays are projected to rise R$ 4 billion, combining a R$ 2.9 billion fall in mandatory spending and a R$ 6.9 billion rise in discretionary spending (R$ 5.7 billion of which comes from the unblock). Key mandatory spending changes include a R$ 4.2 billion drop in personnel costs and a R$ 3.2 billion reduction each in pension benefits and the BPC continuous-payment benefit, partly offset by a R$ 3.4 billion increase in health spending and R$ 1.6 billion in unemployment-related payments.