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Brazil's government had record deficit, benchmark rate 14.25%

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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 deficit
Brazil   An 8.3% drop in Federal Revenue collection
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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.

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