BRASILIA: A key gauge of Brazil’s public finances, the primary fiscal deficit, ballooned in November to one of the worst levels since records began.
In a stark illustration of the challenges facing the country’s new finance minister, Nelson Barbosa, the government’s primary fiscal deficit — the budget balance before interest payments — during the month rose to R$19.6bn, the central bank said.
This brought the 12-month primary fiscal deficit as of November to 0.89 per cent of gross domestic product compared with 0.7 per cent a month earlier. With the addition of interest payments, the level was 9.3 per cent.
The November figure, which is contributing to a rise in gross public debt, was the third highest since records began, according to Reuters data, and comes as President Dilma Rousseff`s ruling Workers` Party, or PT, is lobbying to relax an austerity programme.
“Fiscal results continue to worsen because of falling revenues and rising mandatory expenditures, a trend that will likely continue next year,” said Itaú Unibanco in a research note.
Brazil is facing a growing fiscal crunch as the end of an economic boom fuelled by high commodity prices and credit growth leads to falls in investment and tax revenues.
Mr Barbosa took over as finance minister before Christmas from Joaquim Levy, a fiscal hawk who tried to rein in government spending and increase taxes but was unable to avert the loss of the country`s prized investment grade credit rating.
Seen as closer to Ms Rousseff and the PT, Mr Barbosa has pledged to continue the fiscal consolidation but to also tackle a recession that is threatening to become the country`s worst since the Great Depression of the 1930s.
He faces growing pressure from leftwing supporters of Ms Rousseff, who are opposed to what they see as capitalist measures to stabilise the economy.
The PT has called for an easing of the austerity programme, including looser monetary policy and allowing for higher inflation, in exchange for growth and to preserve jobs.
“Let’s say enough to high interest rates and cuts in investment,” PT president Rui Falcão said in an article published on Monday on a PT website.
Itaú said the primary deficit figure for November was worse than market expectations of a deficit of R$14bn and its own forecast of R$16bn.
Analysts say the key to Brazil`s looming fiscal crisis is its rising levels of gross public debt, which grew to 65.1 per cent of GDP in November, up 7.9 percentage points from December 2014.
Although not considered high by developed country standards, Brazil`s high interest rates mean that a large public debt burden places enormous pressure on the budget in terms of interest payments.
Earlier on Tuesday, the markets reacted positively to a pledge by the government to repay R$57bn it owes to public banks.
The funds were withheld as part of what Brazil’s public account watchdog criticised as accounting tricks designed to conceal the true size of the budget deficit.
But the gains in the country`s currency, the real, were pared back by the bad news on the deficit.
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