Brazilian Government Changes Calculation to Meet Fiscal Target

11/12/2014 - 09h44

After facing a budget blow-out, the government found an alternative that will allow Dilma Rousseff to fail to comply with the cost-saving target.

The savings were meant to be used to pay the public debt interest (primary surplus) this year. The government is likely to finish the year with a primary deficit.

In a bill sent to Congress, Rousseff's team asks permission to use public surplus to pay the PAC (Growth Acceleration Program) expenses and tax breaks, before limited to US$ 26 billion (R$ 67 billion).

The decision was made because the federal government, which until September recorded US$ 6 billion (R$ 15.4 billion) deficit, will not be able to achieve the surplus of 2.15% of GDP (Gross Domestic Product).

The government's advisers classified the measure as the economic team's last attempt of balancing the budget this year.

The bill establishes an automatic discount for PAC payments and tax breaks granted in 2014 -a total of US$ 51 billion (R$ 130,4 billion) by October.

If done before, the discount would have even overcome the savings target of US$ 45 billion (R$ 116 billion), equivalent to 2.15% of GDP.

According to market analysts, that means the government would be able to deduct over 3.1% of the GDP.

On the bill sent to Congress, the government justified the measure as a response to the deceleration of national and global economies.

Translated by JULIANA CALDERARI

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