Portugal’s budget accounts risk returning to the red

Portugal’s Finances ministry is tightening up the rules for the State Budget this year by beefing up control over public spending to ward off the risk of going into the red.

A new decree-law stipulates that funds earmarked for ministries must be used first for salaries, social security payments, and outstanding debts.

The Finance Ministry also requires a 12-month “treasury budget” and the centralisation of reserve management in a single entity.

In October, when drafting the 2026 State Budget, Portugal’s Minister of Finance, Joaquim Miranda Sarmiento admitted that its execution would be “more difficult” due to the level of loans from the Recovery and Resilience Plan (RRP) which had to be paid by the end of the year.

More than six months later – and a series of storms and a war in the Middle East – execution has worsened, although Joaquim Miranda Sarmento still predicts a balanced budget (0%) at the end of the year.

Given this context, the decree-law on budget execution for 2026, published on Tuesday, May 26, shows a reining in of central government spending. One of the main changes is that the Ministry of Finance has defined a hierarchy for the use of budget freezes.

The 2026 State Budget stipulated that budget freezes (funds included in each service’s budget, but whose use is conditional) would correspond to 5% of the budget programme’s allocation, and this amount could be used by order of the member of the Government responsible for the respective sector.

SOURCE: Negócios; Credits: Lusa