Brazil plans to reallocate 20 billion reais to accommodate Lula measures in 2027 budget
Key Facts
Brazil's Planning Ministry estimated that about 20 billion reais would need to be reallocated in the draft 2027 budget to accommodate measures announced by President Lula during his campaign, Reuters reported. The amount is equivalent to $3.95 billion, according to the dollar conversion the agency provided in its coverage of the amendments to be proposed to Congress. The ministry said the reallocation amounted to slightly more than 1% of primary spending subject to the limits set by the fiscal framework. It pledged to maintain the overall spending cap when adjusting provisions in the draft to accommodate the announced policies. It also reaffirmed its commitment to preserving the budget's primary balance target, making these two fiscal commitments part of the arrangements for incorporating the measures into next year's budget.
Among the measures, the government estimated that an increase in Bolsa Familia benefits alone would cost about 22 billion reais in 2027, according to Reuters. That exceeds the reallocation estimated by the Planning Ministry to accommodate Lula's measures in the draft budget. The ministry said higher oil-related revenue had offset the impact of some measures, including fuel tax relief. Other proposals the government intends to fund include free bus travel on weekends and holidays, according to comments by Planning Minister Bruno Moretti to UOL. The minister said the government planned to use part of the mandatory parliamentary earmarks to fund the free transport proposal, linking the measure to a funding source within the budget.
The reallocation arrangements come as Brazil's gross debt stands at 82.9% of gross domestic product, according to the level cited by Reuters in its report published on October 15. In the same report, the agency put discretionary federal spending at about 7.6% of total expenditure in 2025. That share stood at 14.2% in 2000, according to the agency's historical comparison of the composition of federal spending. On markets, Reuters reported before the reallocation announcement that long-term interest rates had fallen sharply since Flavio Bolsonaro led the first round of the election. The agency attributed the decline to investor optimism about a change of government, in its coverage of the fiscal platforms put forward by the candidates ahead of the runoff.
In the rival camp, Flavio Bolsonaro pledged a fiscal adjustment of 200 billion reais in the federal budget if elected, according to Reuters' coverage of his campaign platform. He said eliminating ministries would be one way to secure the funding needed to deliver on that pledge. He added that addressing mismanagement at state-controlled companies would be another source among the measures he proposed to fund the fiscal adjustment. His plan also includes monetizing federal real estate assets, alongside the measures involving ministries and state-controlled companies. Bolsonaro, meanwhile, rejected proposals attributed to his campaign to cut mandatory social spending, standing by his pledge to make the fiscal adjustment through the measures he had announced.
As for the mechanism for amending the government's draft budget, Moretti said in his interview with UOL that it would include "changing revenue sources." He said the changes would also involve reallocating expenditure within the draft to accommodate the latest measures. These amendments form part of policies announced by Lula during his campaign, and the government intends to present arrangements for accommodating them to Congress. The proposal thus covers both revenue and expenditure in next year's budget, according to the planning minister's description of the expected changes. The next legislative step will take the form of submitting amendments to the draft budget, according to the mechanism Moretti outlined in the interview.
Moretti linked the timing of the amendments' submission to Congress to the appointment of the budget rapporteur, saying the government would send them "as soon as the rapporteur is appointed." This comes as Lula and Bolsonaro prepare to contest the presidential runoff scheduled for October 25. The president enters the round with campaign policies that the Planning Ministry is working to accommodate in the draft 2027 budget. His rival enters the vote pledging a fiscal adjustment conditional on victory, while rejecting cuts to mandatory social spending. The next stage will combine completion of the parliamentary process for the budget amendments according to the procedural timing set by the minister with the outcome of the presidential contest on the scheduled polling date.