This was first reported by the newspaper Público, which cited confirmation in the International Monetary Fund’s (IMF) recent annual report on the Portuguese economy; the decision was subsequently confirmed to the same newspaper by an official source from the Ministry of Finance.

Fiscal restraint strategy

This fiscal restraint strategy follows a budgetary year that the authorities deem complex. According to the IMF document, the financial headroom that might have enabled another extraordinary mid-year reduction was absorbed by costs from the severe storms that struck Portugal last February, as the resulting material damage necessitated an unforeseen mobilisation of public funds.

Official data also show a 0.7% of Gross Domestic Product (GDP) deficit in the first quarter, increasing pressure on the government's target of ending the year with a 0.1% surplus.

Similar projections

Both the Bank of Portugal and the IMF share similar projections, anticipating a slightly less favourable budgetary outcome for the fiscal year as a whole, which also ruled out any prospect of new bonuses for pensioners.

Despite the halt on short-term measures, the Ministry of Finance does not rule out structural tax relief in the near future.

In statements reported by Público, Finance Minister Joaquim Miranda Sarmento reiterated the government's commitment to further reducing personal income tax (IRS), deferring any decision to the State Budget proposal for the coming year, due to be submitted to Parliament in October, with the measure strictly contingent upon fiscal space and economic trends in the intervening months.