Bolsonaro: With high food costs, aid to the poor in Brazil has increased by 58% | Business and Economic News

If confirmed, the 58% increase announced by Brazilian President Jair Bolsonaro in a television interview late Tuesday would be much higher than the increase being considered by the country’s Ministry of Economy.

Brazilian President Jal Bolsonaro said in a television interview that his government will increase the monthly payment for a popular welfare program from 190 reais to 300 reais starting in December.

If confirmed, Bolsonaro’s 58% increase announced in an interview with Record TV later on Tuesday would be much higher than the increase that the country’s Ministry of Economy is considering, and put Brazil’s public finances under the microscope.

Officials have said that the “family subsidy” program may be increased to 250 reais, but Bolsonaro, whose popularity plummeted during the coronavirus crisis, said the increase is necessary to compensate for food inflation.

Bolsonaro is preparing for his re-election in October 2022.

The Ministry of Economic Affairs declined to comment, but a source on the economic team said that the government’s “spending ceiling”, which is widely regarded as the main fiscal pillar, will not be threatened.

“It won’t pierce the ceiling, which is taken for granted. Let’s see what the best practice is. The plan is under construction,” the source said.

The rule stipulates that the increase in public expenditure cannot exceed the inflation rate of the previous year. Due to record tax revenues, stronger-than-expected economic recovery and inflation, Brazil’s budget deficit and debt dynamics have improved in recent months.

There was no breakthrough last year or this year, because spending splurge to fight the pandemic is an emergency expenditure that is not subject to the usual budget rules.

Economists at Barclays Bank calculated that the current 8% annual inflation rate gives the government more room to increase spending next year without violating the ceiling, which may add an additional 124 billion reais ($25 billion).

They estimated that the monthly allowance increased to 300 reais, and the number of recipients did not increase, and the government would spend an additional 15 billion reais.

If, as Bolsonaro hopes, an increase of 300 reais for 27 million people instead of the current 14 million people, the annual cost will be nearly tripled from this year’s 35 billion budget, reaching 97 billion reais.

Barclays economists added: “The discussion in 2022 is unlikely to be about the risk of breaching the spending ceiling, but how the government will take advantage of the huge space created by high inflation.”