Brazil's Budget Cuts Could Reach $25 billion

04/01/2015 - 08h16

Given the disappointing results of the public accounts in the first two months of the year, President Rousseff's team may be forced to cut budget spending much more than initially planned. The cut could be from US$22billion (R$70 billion) to US$25 (R$ 80 billion).

The President told Bloomberg on Tuesday (31) that "We're going to carry out a huge cut. A major cut."

Rousseff's statements and her team's evaluations were made after the government data showed the fiscal adjustment implemented in her second term is still far from being effective. The Treasury had record deficit in February. The savings in the first quarter were lower than last year's and the national debt remains high.

According to a presidential advisor, before the results, the federal government initially intended to cut about US$ 18 billion (R$ 58 billion) in spending in 2015. The amount is already seen as not enough to rebalance the public finances considering there is a risk the Congress does not approve all the fiscal program measures.

No final decision has been taken on the amount to be capped, but according to advisors, it will be enough to meet this year's primary surplus target of 1.2 percent of GDP, equivalent to US$ 20.8 billion (R$ 66.3 billion).

Rousseff's administration is considering a bigger spending cut because the current economic downturn would cause the Treasury to struggle to achieve the promised fiscal target.

In addition, the Federal Government knows it will have to make concessions in order to approve the fiscal measures in Congress, what should result in lower savings than initially anticipated.

Translated by JULIANA CALDERARI

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	Sérgio Lima/Folhapress
	BRASÍLIA, DF, 31.03.2015: Brazilian Finance Minister Joaquim Levy. (Foto: Sérgio Lima/Folhapress)