When a state or municipality is unable to pay a debt, the national treasury is responsible for covering the “default”
Throughout 2023, the Union honored a total of R$3.56 billion in Minas Gerais’ debts. In December alone, the Union paid R$1.52 billion in guaranteed debts from States and Municipalities. Among the beneficiaries, the State of Rio de Janeiro led with R$688.39 million, followed closely by Minas Gerais, which had a debt of R$645.10 million paid off by the Federal Executive in the last month of the year.
The data is contained in the Monthly Report of Guarantees Honored by the Union in credit operations and Recovery of Counter-Guarantees (RMGH) for December 2023, released by the National Treasury this Wednesday (31).
Throughout the year, the Union disbursed a total of R$12.29 billion to honor guaranteed debts from subnational entities. Minas Gerais was one of the main beneficiaries, with debts paid by the Union worth R$3.56 billion, representing 29% of the total. The state of Minas Gerais was second only to Rio de Janeiro.
Since 2016, the Union has disbursed R$63.98 billion to honor guarantees in credit operations from States and Municipalities. The low recovery of guarantees is largely attributed to the inclusion of states in the Fiscal Recovery Regime (RRF).
When a state or municipality fails to fulfill its obligations in a credit operation, the National Treasury assumes the debt. In response, the Union’s transfers to the debtor federal entity are interrupted until the difference is paid, which includes fines and interest. However, in some cases, court decisions grant the suspension of debt payments, which is the case in Minas Gerais.
Source: The time
Post Views: 19