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Government Cuts R$10.1 Billion from Budget

12/01/2015 - 09h32

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Isabel Versiani
FROM BRASILIA

The government published on Monday in Brazil's Official Journal a decree laying out R$10.1 billion (US $2.6 billion) in budget cuts this year.

However, the expectation is that the decision may be reversed in the coming days, as it could bring to a halt basic government activity.

Tony Gentile - 9.ago.2011/Reuters
By October, Brazil had accumulated a deficit of US $8.5 billion.
By October, Brazil had accumulated a deficit of US $8.5 billion.

The cut of R$10.1 billion relates to expenses, including those deriving from previous years. The limit on new expenses was reduced by R$11.2 billion (US $2.9 billion), with R$500 million (US $129 million) coming from parliamentary amendments.

The decision to cut was taken because Congress still has not approved legislation to change the fiscal goals for this year. Officially, the goal is still to save R$55.3 billion (US $14.3 billion), in order to reduce public debt.

By October, Brazil had accumulated a deficit of R$33 billion (US $8.5 billion). The government proposal, which is currently under analysis in Congress, would permit a deficit of up to R$120 billion (US $31 billion) by the end of the year.

The state of public finances meant that the government's economic team could not make the cuts of more than R$100 billion (US $25.9 billion) that were required to meet the current targets, but the government wanted to implement the $10.1 billion cuts in order to avoid legal action by the Federal Court of Accounts (TCU, in its Portuguese abbreviation).

The government hopes that Congress will approve changes to the fiscal goal this week, which will permit the reversal of the cuts.

Translated by TOM GATEHOUSE

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