Brazil's New Fiscal Target Shows Public Sector May End the Year in Deficit

07/23/2015 - 10h08

Brazil's new fiscal target announced by the government on Wednesday (22) shows the public sector may end the year in deficit if the measures adopted to increase tax collection do not generate the expected effect.

Finance Minister, Joaquim Levy, and Planning Minister, Nelson Barbosa, informed the primary surplus target was reduced from US$ 20.3 billion (R$ 66.3 billion), 1.1% of GDP, to US$ 2.67 billion (R$ 8.7 billion), 0.15% of GDP.

At this rate, however, there could be a US$ 5.42 billion (R$17.7 billion) deficit if the measures that aim to recover tax debts, repatriate funds and also new concessions fail.

Even after reducing the fiscal target drastically, the government announced an additional US$ 2.63 billion (R$ 8.6 billion) cut in budget spending. In May, a US$ 21.44 billion (R$ 70 billion) cut had already been done.

"Although we are re-evaluating the target, our commitment is to continue to ensure fiscal discipline, to the need to be attentive to the dynamics of public debt," said Levy in an interview.

The government's expects that with the new target the public debt will start to stabilize in 2017 only. For 2015, it is estimated the gross debt stands at 64.7% of GDP and increases to 66.4% of GDP in 2016.

Translated by JULIANA CALDERARI

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