Dívida pública subnacional: a (in) sustentabilidade fiscal do estado de Minas Gerais

Abstract

Public debt plays an important role in government finances, being a key element for the efficient intertemporal distribution of public policies. However, unsustainable indebtedness can have serious repercussions, undermining the economic stability and financial capacity of governments. The state of Minas Gerais faces significant fiscal imbalances, with a rising level of indebtedness. In 2022, the state's net consolidated debt in relation to Net Current Revenue reached 156.95%, with higher ratios only in the states of Rio de Janeiro and Rio Grande do Sul. The purpose of this research is to analyze the sustainability of the public debt of Minas Gerais in a medium-term scenario, based on the fiscal trajectory between the years 2003 and 2022. Public debt sustainability consists of the government's ability to generate sufficient revenue to cover current expenses and debt service without compromising its finances in the future. The understanding of the relationship between the government and the economy was discussed by exploring the Keynesian and neoclassical perspectives represented by the Ricardian equivalence. While Keynes acknowledges public debt as a stimulus for aggregate demand, albeit with qualifications, in the neoclassical view, this debt does not influence economic activity. Regarding intergovernmental relations, the aim was to address the theories of fiscal federalism as well as the institutional history of the debt of Brazilian states in this context. The literature of previous studies on government debt sustainability contributed to the definition of the methodological procedures of this study. The data were extracted, especially from the fiscal annexes of the Fiscal Responsibility Law (LRF) made available in the official government databases. The sustainability of the state's indebtedness was verified in three stages: exploratory analysis of fiscal data, focusing on the goals and limits established in the LRF, examination of the fiscal reaction function between primary results and state debt, and time series analysis combined with Monte Carlo simulation. The results indicated that the criteria for assessing balance proposed in the LRF, although essential for control and transparency, are not sufficient to ensure fiscal sustainability. The growth of public debt has no effect on the state's primary outcome, which remains stable. Furthermore, scenario analyses have indicated low probabilities of sustainability for the debt of the state of Minas Gerais over the next four years.