Brazil Seeks Higher 2027 Primary Surplus as Markets Slide Sharply
Key Facts
Brazilian Finance Minister Dario Durigan said the government would seek a higher actual primary surplus in 2027, without announcing a new numerical target, in a pledge that comes after President Luiz Inácio Lula da Silva’s re-election and a market sell-off. The budget draft published in August forecasts a full primary surplus of 18.6 billion Brazilian reais, while the adjusted balance used to calculate the target is 83.4 billion reais. Durigan’s remarks came as Brazil’s currency and stocks fell sharply, putting fiscal policy at the forefront of investor attention. The minister said the central bank would intervene in the foreign exchange market if necessary. The government also plans to submit a bill to Congress this year requiring policymakers to target the midpoint of the primary balance target range.
The government’s medium-term plan sets the center of the primary surplus target at 0.5% of gross domestic product in 2027, then 1% in 2028, 1.25% in 2029 and 1.5% in 2030, according to the National Treasury. The budget draft says the adjusted balance of 83.4 billion reais is 10.1 billion reais above the center of the 2027 target, set at 73.2 billion reais. The expected full surplus of 18.6 billion reais is presented before deductions, so it differs from the adjusted balance used to measure compliance with the target. The distinction places the draft’s two figures in different accounting contexts rather than treating them as conflicting targets. Durigan did not specify how much the government seeks to exceed the figures in the budget bill.
By contrast, the Finance Ministry’s forecasts still point to a primary deficit for the central government of 53.048 billion reais in 2026 and 44 billion reais in 2027, according to its October forecast median. The ministry estimated gross general government debt at 83.4% of GDP in 2026, rising to 87% in 2027. These figures highlight the gap between the current fiscal forecast path and the surplus target path announced for the coming years. The National Treasury forecast the central government’s actual primary balance would shift from a deficit equivalent to 0.4% of GDP in 2026 to a surplus of 1.5% over the medium term. These paths remain part of the backdrop to debate over the government’s ability to raise the surplus and meet its fiscal targets.
The 2027 budget draft includes a primary spending cap of 2.576 trillion Brazilian reais, up 7.7% from the 2026 cap, according to the Ministry of Planning and Budget. The bill allocates 272.2 billion reais to health, 141.2 billion to education and 133.8 billion to public investment. In a previous fiscal review in July 2026, the government raised its estimate for the central government’s primary surplus after legal deductions from 4.1 billion reais to 10.8 billion reais. The ministry said at the time that the improved estimate did not require spending cuts because the year’s target was balance. The budget details show the spending set out alongside the surplus target, while Durigan said the government would consider reviewing congressional allocations, high public-sector salaries and special pension systems.
Markets plunged after Lula’s re-election: the real fell more than 11% against the dollar in early spot trading on October 26, 2026, and the Bovespa index dropped more than 15%, its biggest one-day decline since 1998, according to Reuters. The sell-off came amid a political and fiscal backdrop that increased focus on statements about the surplus and the budget. Durigan did not attribute a specific currency-support or credit-market-confidence goal to the surplus plan. He said, however, that the central bank would intervene in the foreign exchange market if necessary, without specifying the timing or scale of any intervention. The central bank’s next “Focus” report is scheduled for publication on November 3 at 11:30, following publication of the report on October 26 at 11:30; the report presents market expectations.