Rising Expenditures Before Elections: A Macroeconomic Perspective

The electoral scenario in Brazil has revealed an unexpected trend regarding the expenditures of state and municipal governments. According to data updated by the Institute of Applied Economic Research (Ipea), there was a significant increase in spending by these subnational administrations during the election period, despite inflationary pressures on the economy. State expenditures increased 4.3% above inflation in the first half of the year, surpassing their growth in current revenues (3.1%). In cities, the increase was even more pronounced, with spending up 9.3% compared to 8% in revenue. This phenomenon is mainly due to rising transfer payments that grew faster than local revenues, reflecting a strategy to maintain economic activity above its potential during an intense election period. This global trend has also been observed in other countries where local governments have sought to increase their expenditures before elections to secure popular support. However, the macroeconomic and fiscal implications of these deviations are significant, drawing special attention from financial sectors and the public at large. In a context where federal government restrictions were imposed to avoid excessive use of the public machine during the election period, this trend highlights the complexity in regional fiscal management.