Brazil's Fiscal Watchdog Warns New Measures Add R$40 Billion to 2026 Deficit

Brazil's Independent Fiscal Institution (IFI) reported Thursday that new government measures, including betting regulations, a MEI package, and Bolsa Família adjustments, will add R$40 billion in unplanned spending, increasing the 2026 primary deficit projection. The IFI projects a 0.6% of GDP primary deficit for 2026, which could rise to 1.0% when accounting for additional commitments and discrepancies in the 2027 budget proposal. Stabilizing public debt would require a 2.1% GDP primary surplus, indicating a needed fiscal adjustment of roughly 3 percentage points. The report also highlights that financial operations, such as budget-funded credits, reached R$180.5 billion in net outflows by October 2026, impacting debt trajectory despite not affecting formal fiscal targets. Additionally, the neutral real interest rate estimate rose to 6.1% annually, increasing the probability of gross debt exceeding 90% of GDP by 2030.