Brazil's Government Submits 2016 Budget with Predicted Deficit of R$30.5 Billion

09/01/2015 - 09h09

The government submitted on Monday (31) its proposal for the 2016 budget to the president of the Senate, Renan Calheiros (PMDB - AL), with a primary deficit estimated at R$30.5 billion (USD $8.4 billion) or 0.5% of GDP.

The proposal was presented by minister of Finance Joaquim Levy and minister of Planning Nelson Barbosa.

"Owing to the revenue situation, even after our efforts to cut both compulsory and discretionary spending, it will not be possible to reach our previous target of a R$34 billion (USD $9.4 billion) surplus. Owing to the new situation of revenue and expenses, our prediction for the next year is a primary deficit of R$30.5 billion," announced Barbosa.

Barbosa said the prediction for GDP growth is 0.2%, while inflation is expected to rise 5.4%. The minimum wage will go from R$788 (USD $217) to $865.50 (USD $239) a month. As the proposal still has to go through Congress, the value may be changed.

Barbosa suggested that the government would have to cut compulsory spending in order to rebalance the books. However, any change in this type of spending requires approval from Congress.

The government decided on Sunday (30) to submit the budget with the predicted deficit, rather than bring back the Provisional Contribution on Financial Transactions (CPMF, in its Portuguese abbreviation) - the so called "check tax".

Without the extra revenue from this tax, the government decided to submit a "realistic and transparent budget", without guaranteed revenue, and which may not be achieved.

Translated by TOM GATEHOUSE

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