By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Unable to obtain the expected revenues Brazil’s federal government announced on Tuesday it was increasing the nation’s budget deficit target by R$20 billion this year, from R$139 billion to R$159 billion and further reducing costs.

Brazil, Brasilia,Brazil's Finance Minister, Henrique Meirelles, announcing change in budget target deficit,
Brazil’s Finance Minister, Henrique Meirelles, announcing change in budget target deficit, photo by Fabio Pozzebom/Agencia Brasil.

“At first, everyone is against change in (budget deficit) target, including me,” said Finance Minister Henrique Meirelles at the much awaited press conference on Tuesday night. “(But) when revenue growth is shown, all [government and lawmakers] are responsible, realistic and consider the fiscal review as a consequence of revising inflation expectations,” Meirelles concluded.

Meirelles along with Planning Minister, Dyogo Oliveira, said that revenues from the concession auction of hydroelectric power plants in Minas Gerais, from the regularization of assets abroad by Brazilian citizens and the end of tax exemptions in more than fifty sectors of the economy did not occur as forecast, leading officials to increase the budget deficit target and adopt cost-cutting measures.

Among measures to be adopted by President Temer’s economic team are freezing public sector salary increases for the next 12 months, extinguishing over 60,000 federal government positions (some of which have not yet been filled), and reducing entry level wages for federal workers.

Although Meirelles has said several times that a tax increase is not being discussed, the government has yet to officially discard the possibility of increasing the taxpayer’s burden to increase federal revenues.

The target for next year was also revised from a deficit of R$129 billion to R$159 billion. The amendment of the targets in the Budget Guidelines Law (LDO) must be approved by the National Congress.

In the twelve months ending in June, the primary deficit was just shy of R$167.20 billion, corresponding to 2.62 percent of the country’s GDP, according to data from Brazil’s Central Bank (BC).


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