Brazil to freeze additional 1.4 billion reais in 2019 budget

Brazil to freeze additional 1.4 billion reais in 2019 budget to freeze additional 1.4 billion reais in 2019 budget

By Jamie McGeever and Marcela Ayres

BRASILIA (Reuters) – The Brazilian government on Monday announced an additional 1.443 billion reais ($386 million) freeze on spending, as weak growth squeezes revenue and threatens government fiscal rules and budget forecasts.

The freeze announced in the Economy Ministry’s latest bimonthly public spending and revenue review was slightly below the 2.5 billion reais estimate from President Jair Bolsonaro over the weekend, as the government will cover part of the shortfall with 809 million reais from a reserve fund.

The latest freeze brings the total so far this year to 34 billion reais, of which 3 billion will be covered from cash reserves. The government slashed its 2019 projection to 0.8% from 1.6% earlier this month, and officials on Monday said weak revenues forced its hand.

Article continues below Advertisement...

“The most important explanation is the fall in GDP growth forecasts and lower GDP. This was behind the fall in tax revenues,” Waldery Rodrigues, special secretary to the Economy Ministry, told reporters in Brasilia.

Rodrigues noted that revenues are expected to be 6 billion reais lower than predicted in May. He declined to say which ministries’ budgets will be affected by the latest freeze.

Government officials had said last week they hoped to avoid a fresh round of budget freezes, but President Bolsonaro said on Saturday that the federal budget was “completely compromised” and that spending would have to be cut by 2.5 billion reais.

The government is hoping its proposals to overhaul the country’s expensive system will put Brazil on a more stable financial footing. Its pension reform bill received an overwhelming initial vote of confidence from lawmakers earlier this month.

The government is aiming to post a primary budget deficit of 139 billion reais this year, before interest payments are taken into account. It has also committed to cap public spending growth at the rate of inflation, and not to issue debt to pay for current expenditure.

Rodrigues said the government plans to issue a decree this week with rules to allow workers to withdraw from their federally-run workers severance funds.

The measures are of “extremely high importance” both for the short term impact and the longer term structural benefit of the economy, Rodrigues said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, ) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the , it is one of the riskiest investment forms possible.