(Bloomberg) — Brazil announced a reduction of the total amount of its spending freeze to 13.3 billion reais ($2.4 billion) for this year in an effort to comply with its fiscal goal amid mounting investor concern about public expenditures.
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The country’s primary deficit, excluding interest payments, now stands at 28.3 billion reais ($5.1 billion), within the country’s fiscal rules. According to the numbers announced by the Planning Ministry Friday, the economic team remains close to its tolerance range of 28.8 billion reais.
The government will block an additional 2.1 billion reais at the same time it unfreezes 3.8 billion reais, the ministry said in a note to the report. Estimates of extraordinary revenues fell.
President Luiz Inacio Lula da Silva’s government initially sought to balance the budget in 2024, but will likely end the year with a deficit near the tolerance range even after two budget freezes, including an initial 15 billion reais in July.
Investors remain skeptical of Finance Minister Fernando Haddad’s efforts to shore up public accounts while the leftist Lula keeps pushing for more spending.
“Our numbers are good ones, that’s the truth,” said Haddad said to reporters after event Friday night in Sao Paulo. “People expected a budget out of control, and that’s not what’s happening.”
Adding to investors’ unease, earlier this week the government announced extraordinary credits to help fight wildfires across the country. While that spending will skirt fiscal rules because it won’t be taken into account in the calculation of the primary deficit, it still adds to Brazil’s total net debt, which is about 62% of GDP.
–With assistance from Martha Beck and Daniel Carvalho.
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