Portuguese public accounts recorded, in the first quarter of this year, the first deficit since the end of 2022, reveals the Directorate-General for the Budget (DGO), an entity that is now supervised by the new Minister of Finance, Joaquim Miranda Sarmento.
In a note sent to the newspapers yesterday afternoon, Minister Sarmento’s office notes that the surplus “turned” into a deficit now in March and there is no doubt: the big blame lies with the previous government, of António Costa, and the former Minister of Finance, Fernando Medina.
“This strong degradation of the budget balance, between January and March 2024, results, to a large extent, from decisions and commitments made this year by the previous Government [do PS] and, in many cases, after the March 10 elections”, says the minister’s office in the aforementioned note.
According to calculations by DN/Dinheiro Vivo, based on the summary of the budget execution for the first three months of this year, statistics that are carried out using cash accounting (i.e., it assumes the values that actually entered as revenue and that came out as expenses of the public treasury), the accumulated deficit for the period from January to March will have been very close to 418 million euros, a value that results from an important correction that purges the effect of a mega operation that inflated revenue for the year 2023, and that would distort the monthly execution.
A year ago, the Ministry of Finance reported that “the execution of the first quarter of 2023, excluding the effect of the transfer of the Pension Fund from Caixa Geral de Depósitos (FPCGD) to Caixa Geral de Aposentações (CGA), in the amount of 3018 million euros, resulted in a budget balance of 1881 million euros”.
“Although the FPCGD transfer is neutral for the budget balance from the perspective of national accounts, as it assumes a financial nature it has an impact on public accounting. The analysis of the evolution of revenue aggregates must, therefore, be corrected for this effect”, explained the supervision of then minister Fernando Medina.
The new Finance supervision confirms that this correction takes place following the “transfer, in 2023, of all responsibilities assured through the CGD Staff Pension Fund to the CGA”.
However, says the Ministry of Finance, “adjusting the effect inherent to the FPCGD, the budget balance of Public Administrations (PA) has a drop of 2299.1 million euros compared to the same period of the previous year”. This reduction drags the positive balance to a deficit of 418 million euros at the end of March. Since December 2022, the Government has not delivered a deficit.
But even without correcting the aforementioned transfer of the CGD pension fund to the State perimeter (CGA), the MF indicates that the accounts would already record a deficit at this time of year (March 2024), although much smaller than the corrected deficit cleared.
Purging the transfer from CGD (which appears as just revenue, in 2023, but will be used to pay all pensions to Caixa bank employees, therefore, it will increase expenses in the coming years), Miranda Sarmento’s ministry indicates that “the growth of revenue, at 4.3%, excluding the FPCGD transfer operation, reflects the evolution of contributory revenue (9.6%) and non-tax and non-contributory revenue (10.2%), given the drop in revenue tax (-0.3%)”. “The growth in non-tax and non-contributory revenue (10.2%) was influenced by the behavior of the aggregate of other revenues (27.1%) and transfers (10.1%).”
“The growth of primary expenditure [despesa total descontando os juros] at 15.7% (15.1% in actual expenditure) is essentially explained by increases in transfers (23%), personnel expenses (7.8%) and the acquisition of goods and services (7.2%). ”
