Brazil’s administration has signaled a shift in how it treats the large judicial liabilities that have long been kept outside fiscal targets, proposing that 39.4% of court-ordered debt payments scheduled for 2027 be counted within the fiscal target, according to budget guidelines presented to Congress on Wednesday.
The share proposed for inclusion exceeds the floor established by a constitutional amendment approved last year, which permits the government to bring at least 10% of these payments - those arising from final rulings against the federal government - into fiscal targets. By designating a larger portion, the government moves the reported primary balance closer to its headline goal, since many of the hefty court-ordered disbursements have been excluded from fiscal metrics in recent years.
At a press briefing, Planning Minister Bruno Moretti framed the choice as one of nominal consistency. He said:
"Even though we could have worked with 90% of the court-ordered debt payments outside the target, we decided to maintain the same nominal amount as in 2026."
In the draft budget guidelines bill, the administration set a primary surplus target equivalent to 0.5% of gross domestic product (GDP) for 2027. However, because 60.6% of the court-ordered payments - roughly 57.8 billion reais, or about $11.58 billion - are still projected to be settled outside the fiscal target, the effective primary result would be materially lower, translating to an effective surplus of approximately 0.1% of GDP for 2027.
The contrast between headline targets and effective outcomes is already evident in the current year. For 2024, the government is targeting a primary surplus of 0.25% of GDP but expects that, once payments outside fiscal rules are accounted for, the effective primary position will be a deficit of 0.4% of GDP. The budget bill also embeds macro assumptions for 2027 of GDP growth at 2.56% and inflation at 3.04%.
Medium-term projections
The guidelines reaffirm medium-term fiscal projections through 2030. The government kept its targets of a 1.0% primary surplus in 2028 and 1.25% in 2029, and for the first time set a 1.5% surplus target for 2030. After adjusting for the projected share of court-ordered liabilities that remain outside fiscal rules, these effective primary surpluses would be 0.6% of GDP in 2028, 0.9% in 2029 and 1.3% in 2030.
Officials also provided an outlook for gross public debt, which they described as the main gauge of fiscal solvency. The government forecasts gross debt at 83.6% of GDP for this year, unchanged from estimates published in January. That level represents an increase of 11.9 percentage points during the current president's term, and the document notes the president is seeking reelection.
Gross public debt is projected to rise to 86.0% of GDP in 2025 and to peak at 87.8% in 2029 under the new projections. Earlier this year the government had expected a higher peak of 88.6% of GDP in 2032. Finance Ministry Executive Secretary Rogerio Ceron said:
"This trajectory shows our fiscal targets are compatible with debt stabilization."The updated estimates show debt declining to 83.4% of GDP by 2036, the final year in the government's fresh horizon.
Exchange-rate disclosure in the budget document uses $1 = 4.9914 reais.
Implications and context
By bringing a larger slice of court-ordered liabilities inside the fiscal target, the administration reduces the gap between headline and effective results but leaves a majority of judicial payments outside fiscal rules. The budget guidelines outline a path of gradually rising headline surpluses through 2030 while also showing continued near-term pressure from high gross public debt levels.