Primary deficit soars in July

The payment of R$62,78 billion in court-ordered debts caused a jump in the Central Government's primary deficit in July, reaching R$59,12 billion. This represents the second-worst result for the month, behind only July 2020, during the COVID-19 pandemic. In the same month of 2024, the deficit was R$8,86 billion, with the payment of court-ordered debts concentrated in February.

According to the Prisma Fiscal bulletin, the market expected a smaller deficit of R$49 billion. From January to July, the deficit totaled R$70,27 billion, down from the R$76,24 billion recorded in the same period in 2024.

The exclusion of R$26,3 billion in court-ordered debts from the fiscal target, as per agreement with the Supreme Federal Court (STF), maintains the government's projection of closing the year within the R$31 billion deficit limit, as provided for in the new fiscal framework.

Despite pressure from court-ordered payments, record federal revenue in July helped contain the deficit. Net revenue grew 10% in nominal terms and 4,5% in real terms. Expenses, also driven by Social Security and the BPC (National Social Security Benefit Program), rose 35,8% in nominal terms and 1,6% in real terms. BPC spending alone grew 11,9% above inflation.

In contrast, spending on social programs with cash flow control fell 5,5% in real terms. Bolsa Família saw a reduction of R$812,6 million, a 5,8% drop, following adjustments to registrations.

Public investment totaled R$37,9 billion between January and July, an 18,2% decrease compared to the same period the previous year, after adjusting for inflation. The Treasury attributes this fluctuation to the irregular pace of construction and the policy of phasing discretionary spending.