With revenue plummeting, Meirelles will have to cut another R$ 40 billion.

247 - With tax revenue hitting record lows, the economic team will begin the year having to cut spending to ensure compliance with the 2017 fiscal target, set at a primary deficit of R$ 139 billion, or 2% of the Gross Domestic Product (GDP). The figures are not yet finalized and depend on revenue performance. But government officials say the number should range between R$ 20 billion and R$ 40 billion, with an even higher figure not ruled out.

This information comes from a report by Martha Beck in O Globo.

"The 2017 Budget has two uncertainties on the revenue side. One is that the government is counting on R$ 40,2 billion in extraordinary resources that may not materialize. This involves R$ 11,8 billion from asset sales (such as Caixa Seguradora, IRB, and instant lottery), R$ 18,4 billion from new concessions, and R$ 10 billion from the reopening of the repatriation program, which is not even being processed in Congress yet. All of this depends on the mood of investors and parliamentarians."

The other uncertainty lies in the projections for economic growth. Revenues were calculated considering that GDP will grow by 1,6% in 2017. And although the government later reduced its estimate to 1%, the budget law (LOA) was approved based on the higher number. This means that tax collection is not expected to perform as favorably as initially predicted. Within the economic team itself, there is even analysis of the possibility of reducing the GDP projection to something close to 0,5%, which would further lower the revenue outlook.

On the expenditure side, the economic team has already managed to curb fiscal expansion with the implementation of the public spending cap in 2017. Approved last year, it stipulates that, for a minimum period of a decade, annual expenditures must be equal to those of the previous year plus inflation for that period. This rule forced the government to make an initial cut of R$ 4,7 billion in this year's budget.