Brazil: IFI warns of fiscal discrepancies in 2027 budget projections

The Independent Fiscal Institution (IFI) of the Federal Senate has identified significant discrepancies in the Brazilian government's 2027 budget projections. According to the Fiscal Monitoring Report (RAF nº 116), the federal government may need to freeze R$ 35.7 billion in discretionary spending to meet fiscal framework targets.

A major point of contention exists regarding the primary result: while the Executive branch estimates a surplus of R$ 18.6 billion, the IFI projects a deficit of R$ 86.1 billion. This R$ 104.8 billion gap is attributed to the government's optimistic macroeconomic indicators, such as a projected 2.5% GDP growth and 3.6% inflation, compared to the IFI's more conservative estimates of 1.8% GDP growth and 4.0% inflation.

Furthermore, there is a R$ 63.7 billion difference in projected mandatory transfers to states and municipalities. The government's Annual Budget Bill (PLOA) predicts R$ 610.6 billion in transfers, whereas the IFI estimates the amount will reach R$ 674.3 billion. The IFI also noted risks regarding the rigidity of mandatory expenses, particularly the rising trajectory of court-ordered payments (precatórios), and the complexities introduced by the tax reform transition.