Brazil targets higher primary surplus in 2027

Brazilian Finance Minister Dario Durigan has signaled that the government will seek a higher effective primary surplus next year, marking a more ambitious fiscal stance. He said the primary surplus projection for next year will be increased, although no specific target value was disclosed. The move comes as authorities seek to reinforce their commitment to fiscal consolidation and adjust expectations around Brazil's budget path.

Durigan stated that the government aims to strengthen its primary balance objective by shifting the focus to the centre of the fiscal target band. This change is intended to move policy away from merely meeting the lower edge of the target toward a more demanding midpoint objective. The statement indicates a deliberate effort to tighten Brazil's fiscal guidance for the coming year.

To underpin the more ambitious stance, Durigan said the government plans to submit legislation to Congress this year. The proposed law would require policymakers to formally target the midpoint of the primary balance goal rather than its lower bound. By embedding the midpoint focus in law, fiscal authorities aim to make the commitment to a stronger primary surplus more explicit and binding for future budget decisions.

The planned proposal is expected to define how the midpoint of the target band should guide fiscal planning. While specific numerical targets were not given, the emphasis on the centre of the band signals that future budgets will be prepared with a tighter fiscal objective as the reference point. This approach is framed as a way to give clearer direction to fiscal policy and to shape expectations about Brazil's fiscal trajectory.

Alongside the higher surplus goal, Durigan highlighted policy tools that could support the government's objectives. He noted that, if necessary, the central bank will intervene in the foreign exchange market. This option is presented as part of the broader policy mix available to manage any market reactions while fiscal measures are implemented.

Durigan also said the government will hold discussions on key areas of public spending as part of the fiscal effort. These talks will cover the size of Congress budget earmarks, what he described as excessive salaries in the public sector, and special pension regimes. These items represent significant components of public expenditure and are identified as subjects for review as the government works toward a higher primary surplus next year.

Durigan's remarks were delivered following a period of market selling in Brazil after the re-election of President Luiz Inacio Lula da Silva. Against this backdrop, the announcement of an increased primary surplus projection and a formal midpoint target is intended to clarify the government's fiscal course for the coming year. While the detailed measures and exact figures have yet to be presented, the announced steps outline the main elements of Brazil's planned fiscal strategy.