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Government Announces $22.7 Billion Budget Cut
05/22/2015 - 15h15
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FROM BRASÍLIA
At a time of falling revenue and risk of having the adjustment package disfigured in Congress, Rousseff's administration announces this Friday (22) a budget cut of approximately $ 22.7 billion (R$ 69 billion), the biggest in the Workers' Party era, in an attempt to beat the market's scepticism that it will meet its 2015 fiscal target.
By setting the cut, the government estimated the country will have a retraction of 1.2% of GDP this year, worse than the previous forecast (0.9%). Official inflation is 8.26%, well above the centre of the target (4.5%).
The cut aims to reduce $ 16 billion (R$ 49 billion) in spending proposed by the government and other $ 6.6 billion (R$ 20 billion) will come from parliamentary amendments, funds used by deputies and senators for their electoral bases.
To ensure more cash and meet this year's fiscal target, the government issued on Thursday (21) a temporary measure increasing the rate of the Social Contribution on Net Profits (CSLL) charged from banks from 15% to 20%, which is expected to generate $ 1.3 billion (R$ 4 billion) per year.
By publishing its revenue on the eve of the announcement, the government shows its difficulty to save enough to pay 2015 interest.
Last month's federal revenues fell 4.6% compared to April 2014. It is the worst result for the month since 2010.
The weak result reflects the decline in sales of goods and services as well as industrial production.
The struggle to approve a fiscal adjustment package has also contributed to worsen the situation.
Translated by JULIANA CALDERARI