Brazil Freezes $13.7 Billion In Government Spending To Meet Fiscal Target
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The Brazilian government on Wednesday announced that it would freeze up to 28 billion reais ($13.7 billion) in obligatory and discretionary spending this year, following weak economic growth forecasts that could cut into its primary surplus target.
Speaking during a press conference in the capital, Brasilia, Finance Minister Guido Mantega said that the budget freeze would not affect investments set aside for the World Cup next year, as well as other government’s priorities, including education, health and infrastructure.
The Brazilian government on Wednesday announced that it would freeze up to 28 billion reais ($13.7 billion) in obligatory and discretionary spending this year, following weak economic growth forecasts that could cut into its primary surplus target.
Speaking during a press conference in the capital, Brasilia, Finance Minister Guido Mantega said that the budget freeze would not affect investments set aside for the World Cup next year, as well as other government’s priorities, including education, health and infrastructure.
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Rather, the ministries of Cities and Defence would likely bear the largest cuts in spending, as tax revenue have fallen short of expectations this year, due to weaker growth and tax cuts offered by the government.
[quote]”The backdrop of the international crisis led the government to adopt measures to stimulate the economy which, at this point, have led to a reduction in revenues and an increase in spending,” Brazil’s planning ministry said in a statement cited by the Wall Street Journal.[/quote]If higher tax revenue streams into government coffers later the year, then the suspended funds will be gradually released, revealed Mantega.
Brazil’s government has targeted a primary surplus of between 2.3 percent to 3.1 percent of gross domestic product this year. In March, the public sector primary budget surplus had shrunk below 2 percent.
Additionally on Monday, a central bank survey forecasted that the economy would grow by just 2.98 percent this year, marking the first time in a decade that economic growth has been below 3 percent for three consecutive years.
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Last year, the Brazilian government also withdrew 12.4 billion reais from its wealth fund and discounted another 34.9 billion reais in infrastructure investments from its primary surplus goal in order to meet its 2012 fiscal target.
Mantega said that the government could deduct up to 45 billion reais in investments and tax breaks this year, in order to boost its savings.
[quote]”Even during a global crisis, Brazil continues to have a solid fiscal policy and its surplus is larger than in other countries,” he said.[/quote]
