Download VAT on fuel and food? The four warnings of Sarmento

O minister of Finance, Joaquim Miranda Sarmento, made several warnings about the Portuguese economy on Sunday, making it clear from the outset that reducing the VAT on food or fuel would cause the country to again record a deficit. 

A decrease in VAT on fuel and food would lead country to “deficit”

The Minister of Finance warned that the reduction of fuel VAT and the application of zero VAT to the food basket, requested by the Arriga and PS, portugal would be in deficit by 2027. 

“To approve such a proposal, [Enough and PS] both have to vote in favour, [so], if you want to make a coalition and approve it, what they're saying to the country is they want a deficit in 2027“, stated Miranda Sarmento in an interview with the agency Lusa, outside the informal meeting of Economic and Financial Affairs Ministers (Ecofin) in Dublin. 

Less than a month from the government’s handing over to parliament its proposal for a State Budget for 2027 (OE2027), the minister added that Aquira and PS would have to, in addition to presenting “a measure that has a budgetary impact”, move forward with another “balanced counterpart”, on the revenue side, on the penalty that the country “quickly slips into a deficit”.

Government estimates that Portugal will continue to have “reduced surplus” in 2027

O Government provides that Portuguese public accounts continue to record a “reduced positive balance” in 2027, but lower than the surplus of 0.7% of gross domestic product (GDP) reached in 2025.

“ We continue to say that this year we will have a positive budget balance, relatively close to zero, and, next year, we will continue to have a surplus. When I say reduced, [means that] will not be 0.7% of GDP as we had in 2025, it will be lower ", said Joaquim Miranda Sarmento.

Already on Friday, the minister had anticipated to Lusa that the public accounts should end 2026 with a budget surplus “next to 0”.

Sarmento argues that ECB should “act carefully” in response to inflation

The Minister for Finance also argues that the European Central Bank (ECB) must act “carefully” against price pressures, considering the situation different from the inflation crisis of 2022 for the result of a shock of the offer.

Joaquim Miranda Sarmento considered it “I need to act carefully because this is a crisis quite different from what happened in 2022,” when inflation peaked following the Russian invasion of Ukraine.

“ Each time the European Central Bank considers raising interest rates, [must] understand whether this actually has an impact on inflation control or not, because in this situation monetary policy is less effective and has less degrees of freedom“, pointed out.

No “absolute red lines”, but with reservations about EU revenue

Portugal has no ‘absolute red lines’ in relation to new own resources under discussion to finance the next EU budget, but holds reservations on technical issuesThe Minister of Finance told Lusa.

“ We don't have absolute red lines. We have reservations in some own resources, but natural reserves and that, in negotiation, may even be mitigated or resolved,” said the governor, in an interview with Lusa, in the margins of the informal meeting of Economic and Financial Affairs Ministers (Ecofin) in Dublin.

According to the minister, Portugal “does not reject any own resource at the outset” in the Multiannual Financial Framework (MFF) for 2028-2034.