Brazil’s Central Bank States Unclaimed Bank Funds Cannot Assist in Achieving Fiscal Target

By Marcela Ayres

BRASILIA – Brazil’s central bank announced that unclaimed funds held by financial institutions cannot be categorized as primary revenue, posing a challenge for the government’s plans to leverage these funds to achieve this year’s fiscal target.

The government, led by Senator Jaques Wagner, proposed a bill, recently approved by the Senate and pending approval from the Lower House. This bill suggested allocating these funds to the Treasury as a compensatory measure to balance out expensive tax exemptions benefiting certain sectors and small municipalities.

Treasury Secretary Rogerio Ceron recently estimated that these unclaimed funds could total approximately 8 billion reais (around $1.42 billion).

In a technical note shared with lawmakers, the central bank stated that including these funds in the federal government’s accounts would amount to a transfer of financial assets from the private to the public sector without a conventional transaction.

The note clarified, "Therefore, integrating these private deposits … should be recorded as an asset adjustment, reducing net debt, and, assuming no other changes, gross debt, but with no effect on the primary outcome."

The bill specifically suggested that the Treasury appropriate these unclaimed funds as primary budgetary revenue for fiscal statistics and primary result calculations.

The central bank recommended outright rejection of this stipulation, arguing that it would compel policymakers to display a primary surplus, contradicting its statistical methodology.

This year’s fiscal target is a zero primary deficit, with a permissible margin of 0.25% of gross domestic product (GDP). This means the government can record a deficit of approximately 29 billion reais and still fulfill the target.

The central bank’s methodology is critical in assessing compliance with these fiscal goals.

Other measures within the bill, however, could qualify as primary revenue. For example, transferring judicial deposits from public bank Caixa Economica Federal and public funds and agencies to the Treasury are viewed favorably.

($1 = 5.6198 reais)