Brazil's government had record deficit, benchmark rate 14.25%Staff writer ▼ | April 29, 2016
Declining revenues and rising mandatory spending have caused Brazil’s central government (National Treasury, Social Security and Central Bank) to post its biggest quarter-one primary deficit in history.
Brazil An 8.3% drop in Federal Revenue collection
From January to March, the deficit reached BRL 18.216 billion. In March alone, it reached BRL 7.943 billion, the highest number for the month since record-keeping began in 1997.
The figures provide insight into the deterioration of public accounts in 2016. In 2015, the central government had registered a primary surplus (i.e. savings used for paying interest on government debt) of BRL 1.504 billion in March, and a BRL 4.493 billion surplus in quarter one.
From January through March, central government net revenues dropped 3%, discounting inflation measured by the Extended National Consumer Price Index (IPCA).
The primary reason was an 8.3% drop (inflation discounted) in Federal Revenue collection, as a result of recession.
Brazil's central bank left its benchmark interest rate on hold at 14.25% for a sixth consecutive time, amid stubbornly high inflation and political uncertainty.
The bank which makes rate decisions eight times a year has held its key Selic rate steady since the last of seven consecutive hikes in July 2015.
Despite the faltering economy, with a 3.8% shrink in GDP last year due to persist through 2016, according to the IMF, the market consensus had been that the interest rate would not change. With a budget deficit estimated in 11% of GDP, and inflation at 10.67% in 2015 and climbing the decision comes as no surprise.
Price rises are forecast by the central bank to ease to 6.6% this year, then 4.9% in 2017 and 4.5% in the first quarter of 2018. ■