Brazil faces fiscal warnings over budget deficits and tax revenue risks

Brazil faces significant fiscal challenges as various oversight bodies issue warnings regarding the national budget and tax revenues. The Independent Fiscal Institution (IFI) projects a primary deficit of R$ 86.1 billion for 2027, diverging sharply from the government's projected surplus of R$ 18.6 billion. To meet fiscal targets, the IFI suggests the government may need to freeze at least R$ 35.7 billion in spending.

Simultaneously, the Federal Court of Accounts (TCU) has warned of risks in overestimating revenue from dividend taxation, which is intended to offset income tax exemptions. Auditors noted that current collection levels are significantly below the required monthly averages to meet annual projections.

In addition to broader fiscal concerns, the Comptroller General of the Union (CGU) questioned Correios regarding a R$ 1 billion reduction in labor liabilities. The state-owned postal service has since corrected its accounting records, adding R$ 876.2 million back to its 2023 balance sheet. Meanwhile, the Attorney General of the National Treasury (PGFN) has advised caution in setting rates for the new Selective Tax to avoid market distortions during the ongoing tax reform transition.