Brazil Government Claims Ability to Eliminate Country’s Primary Deficit by 2022

RIO DE JANEIRO, BRAZIL – (Reuters) The Brazilian government’s interest payment bill on the national debt could fall by R$417 (US$100) billion over the course of its four-year term ending in 2022, by which time the primary budget deficit could also be completely eliminated, a senior Economy Ministry official said on Thursday, January 23rd.

The fall to a record low 4.5 percent in the central bank’s benchmark interest rate since the middle of last year accounts for the interest savings, and the public finances could be even stronger if economic reforms accelerate growth further, said Waldery Rodrigues, special secretary to the Economy Ministry.

Speaking to journalists in Brasilia, Rodrigues said the primary budget deficit, before interest payments are taken into account, was on track to end last year at one percent of gross domestic product, well below the official goal of 2.3 percent of GDP.

The deficit could be wiped out entirely by the end of 2022, bringing almost a decade of budget shortfalls to an end. Rodrigues also said the national debt was on track to end last year at 77 percent of GDP or below, having struck a record high 79 percent in August.

Getting the public finances back on a more even keel was the government’s No. 1 economic aim last year, with a sweeping reform of the social security system aimed at generating savings of R$1 trillion over the next decade its main achievement.

The government hopes Congress will continue the reform process and approve three constitutional amendments in the first half of this year, including the “federative pact”, a new framework for federal and local government finances, Rodrigues said.

Perhaps optimistically, he also said he expects Congress to approve three of the government’s main economic reform measures this year: the complex tax reform, administrative reform and “fast track” privatization.

The government is barely halfway through the fiscal adjustment needed to completely balance its books and will do what is necessary to keep the process on track, Rodrigues said, but added that he hopes there will be no need for spending freezes this year.

As well as lower interest payments, the fiscal outlook this year will be strengthened by state asset sales, while the federal development bank BNDES will also return the full R$165 billion of loans it still owes the government by the end of 2022, Rodrigues said.

Source: Reuters