Blockade does not solve the root of the fiscal problem, says expert

The federal government announced, on Friday (22), a new block of R$22.1 billion in the 2026 Budget. The measure was motivated by the growth in spending on the BPC (Continuous Payment Benefit) and social security benefits. With the new freeze, the total blocked for the year reached R$23.7 billion, considering the previous blockage of R$1.6 billion carried out in March.

The decision was made following a reassessment of government expenditure and revenue, which identified the need for additional containment. According to information released, the growth in expenses with the BPC was estimated at R$14 billion, while social security benefits registered a projected increase of R$11.5 billion.

Blocking mechanism and fiscal target
Budget blocking is triggered by the economic team when expenses grow above the limits established by fiscal rules, or when revenues are frustrated. The measure essentially consists of reducing investments and the funding of the public sector to guarantee the payment of mandatory expenses.

For now, no contingency has been announced, a more severe mechanism, activated when there is a risk of non-compliance with the fiscal target.

In an interview with CNN, the economic consultant and researcher at FGV, Tatiana Pinheiro, stated that the need for greater control of public accounts was already expected. "There was already an expectation of a need for greater control over public accounts. The market consensus was around this, a little lower, but it was already clear," he said.

Pinheiro highlighted that the increase in expenses above the limit, driven by the BPC and the cost of Social Security, has been recurring in recent years. "They always review these accounts, they say they include them in the budget, but there is always frustration," he added.

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Population aging worsens the situation
Tatiana Pinheiro pointed out the aging of the Brazilian population as a structural factor that makes it difficult to control social security expenses. According to her, the age group over 60 years old grows at a rate of 3.6% per year, according to the IBGE (Brazilian Institute of Geography and Statistics).

"If you imagine that, apart from inflation, you have almost 4% growth in the volume of people entitled to receive retirement due to age, it is difficult for you to be able to equate it the way the rules are set up now", he assessed.

The expert highlighted that a large part of the Brazilian population is made up of classes C and D, who perform precarious work throughout their lives and, therefore, have a high probability of reaching the age of 65 without sufficient contributions to the INSS, resorting to the BPC.

"According to the IBGE, from 2042 onwards the population will start to contract. We stopped being a young country a long time ago", he stated.

Fraud and limits of control measures
Tatiana Pinheiro acknowledged that the fight against fraud at the BPC has advanced, but assessed that the results are still insufficient to resolve the fiscal problem. She cited as an example the granting of sickness benefits via medical reports obtained over the internet, a practice that would have artificially boosted demand.

"This gave a huge boost to benefits for health problems. The ease was very great and so was the possibility of fraud", he explained, adding that this process has already been made more difficult.

For the expert, the budget blockage does not solve the root of the problem. "You're not solving what really makes expenses bleed, which is the entire indexation of benefits to the minimum wage," he said.

As more sustainable alternatives, she mentioned the de-indexation of expenses and a broader review of subsidies and subsidies, which totaled more than R$500 billion in tax expenditure in the previous year. "There is a solution, but you need a bigger discussion in society for this", he concluded.

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Source: CNN