BRASÍLIA, 23rd July, 2024 (WAM) – Brazil has raised its primary deficit projection for 2024 to $5.2 Billion, according to a new report by the Ministry of Planning and Budget, informed Agência Brasil, Brazil’s State News Agency and WAM’s partner.
Bloomberg states that the forecast puts the primary deficit at the limit of the tolerance range established in the nation’s fiscal framework. In May, the government had anticipated a gap of US$2,6 billion (R$14,5 billion) for this year, more than the estimate of US$1,6 billion (R$9,3 billion) in March.
Brazil's Finance Minister, Fernando Haddad, said last Thursday that the government will freeze around US$2,7 billion (R$15 billion) in spending from this year's budget to comply with the tolerance band, which is closely watched by investors, reported Bloomberg. Estimates from economists at two major banks operating in Brazil suggest that the government would have required freezing at least twice the amount it did to eliminate the primary budget deficit in 2024.
Treasury Secretary Rogério Ceron expressed confidence that Brazil’s government will meet its 2024 fiscal target, acknowledging that the concerns are legitimate. “Although the government has raised its primary deficit forecast for 2024 to R$28,8 billion, the federal accounts could end the year with a negative result of around R$8 billion”, said Ceron on Monday, according to Agência Brasil.
Bloomberg states that the spending freeze was due to be announced this week, along with the new budget report. However, the Brazilian government decided to move faster to head off investor concerns about expenditures that have caused local assets to sell off.
Earlier on Monday (22/07), President Luiz Inácio Lula da Silva declared that the administration would freeze budget resources whenever necessary, vowing fiscal discipline after investor doubted his willingness to cut spending to hit budget targets in recent weeks. "If we spend more than we earn, we will go broke," he said, while stressing the importance of making Brazil's economy grow and controlling inflation.
Lula had previously cast doubt on his commitment to the fiscal target, saying in a local TV interview that he is “not obligated to set a goal and stick to it” if he decides he “has more important things to do”, Bloomberg affirmed.