BRASILIA (Reuters) – Brazil’s government on Monday defended its appropriation of so-called forgotten bank funds as a legitimate tool to boost budget revenue rather than a gimmick, arguing that this was already implemented by a previous administration 27 years ago.
The move was passed as part of a bill alongside several initiatives to offset costly payroll tax exemptions, but it has sparked controversy. The central bank issued a note to lawmakers stating that these funds, surpassing 8 billion reais ($1.45 billion), should not count toward the fiscal target.
Forgotten funds are assets held in deposit accounts whose registration details have not been updated in accordance with guidelines established by the central bank in 2019.
Speaking at a press conference, the Finance Ministry’s executive secretary, Dario Durigan, said that former President Fernando Henrique Cardoso’s administration issued an executive order on the matter in 1997, which was later approved by Congress.
The 1997 measure allowed for the incorporation of the funds as budget revenue.
“This is not some kind of fiscal trick being used by the government,” Durigan said.
He argued that under Brazilian law, these resources should eventually be absorbed by the public sector, as they do not belong to financial institutions.
By law, the central bank’s methodology is used to assess compliance with the fiscal target, which this year aims to eliminate the primary deficit, with a 0.25% margin of GDP on either side.
The bill’s final version removed a provision that would have effectively required the central bank to incorporate these funds. Still, it stated that they would count “for the purposes of verifying compliance with the primary balance target.”
This has raised concerns that the government may be resorting to fiscal maneuvers to boost revenue to meet its fiscal target.
Durigan said the government expects to hold talks with the central bank in the coming weeks.
“If the central bank maintains its position (in line with past practices), it should be considered primary revenue,” he said.
The central bank did not immediately respond to a request for comment.
($1 = 5.5347 reais)
(Reporting by Marcela Ayres in Brasilia; Editing by Matthew Lewis)
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