Brazil government lauds fiscal gains as markets voice skepticism
Adds further comments, context
By Marcela Ayres
BRASILIA, Sept 23 (Reuters) -Brazil's Finance Ministry said on Monday that the government's efforts should be recognized as the fiscal situation improved and exceeded expectations, despite market skepticism over the government's commitment to fiscal balance.
Following the release of a bimonthly revenue and expenditure report, which economists viewed as overly optimistic, the ministry's executive secretary Dario Durigan backed the government's approach, arguing that the report was thorough.
Expenditures are expected to close the year at around 19% of gross domestic product (GDP), below levels seen in previous administrations, he said.
In an unexpected move for many, the report reversed the spending freeze implemented earlier this year due to higher projected revenues, which marginally helped reduce the expected primary deficit.
Markets reacted negatively to the move.
"The government may even meet the fiscal target this year, but distrust regarding its commitment to the sustainability of public finances only increases," asset management firmAzimut said in a note to clients.
Brazil's real BRBY weakened more than 1% against the U.S. dollar early in the session before paring some losses.
"Our flight plan is to maintain and meet the fiscal target," said Durigan, referring to the goal of eliminating the primary deficit this year, which has a tolerance band of 0.25% of GDP in either direction.
That means the government could still record a 29 billion real ($5.23 billion) shortfall.
The Planning Ministry's executive secretary, Gustavo Guimaraes, noted that by law the government cannot freeze spending if it is meeting the fiscal target, as reflected in the report.
Durigan emphasized that the government has been conservative in its calculations and has yet to account for forgotten funds in banks, which could boost revenues by more than 8 billion reais.
Congress passed a bill allowing the Treasury to appropriate these funds to help meet this year's fiscal target, though it left room for the central bank to exclude them from its methodology for calculating public accounts.
By law, the central bank's methodology is used to verify compliance with the target.
($1 = 5.5429 reais)
Reporting by Marcela Ayres; editing by Gabriel Araujo and Alistair Bell
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
