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Brazil cuts budget, $17.6 bn primary deficit expected

Staff writer ▼ | February 23, 2016
Brazil’s Ministry of Planning, Budget and Management and Ministry of Finance announced in Brasília a BRL 23.4 billion ($5.8 billion) budget cut for this year.
LatAm   The government will try to cut spending in Brazil
The goal is to cut spending and try to steer the country towards a primary surplus of 0.5% of Gross Domestic Product (GDP) this year. The surplus is spent on federal government debt interest.

BRL 4.2 billion ($2 billion) were slashed from the Growth Acceleration Program (PAC) and BRL 8.1 billion ($2 billion) were taken out of parliament amendments, i.e. funds made available for Congress and Senate members to roll out projects in their municipalities.

While making the announcement, the government announced its revised GDP forecast for this year – a 2.9% reduction over 2015. Inflation is expected to be up 7.1% by the end of 2016. The upper threshold of the inflation target is 6.5%.

Despite the government’s efforts, financial players operating in the country believe the target of achieving a primary surplus this year will not be met. Firms polled by the Ministry of Finance expect a BRL 70.751 billion ($17.670 billion) deficit.

Brazilian financial institutions polled by the Ministry of Finance expect the National Treasury, Social Security and Central Bank, collectively known as the Central Government, to run a BRL 70.751 billion deficit ($17.670 bn at current exchange rates) this year, a wider number than January’s BRL 68.23 billion forecast ($17 billion).

The projection is part of the third edition of poll Prisma Fiscal, conducted by the Economic Policy Secretariat of the Ministry of Finance, with 30 financial institutions as respondents. The results were released in Brasília.

The deficit expected in 2017 has widened from BRL 30.87 billion ($7.71 vn) to BRL 42 billion ($10.4 billion). The result is a far cry from this year’s target of a primary surplus worth 0.4% of Gross Domestic Product (GDP), i.e. higher revenue exceeding spending (interest-related expenses not included) of 0.4%, or BRL 24 billion ($5.99 billion).