Brazilian government reduces 2015 primary surplus target to 0.15% of GDP

The decline in federal tax collection caused by the economic downturn has led the Brazilian government to reduce the primary surplus target set for the public sector this year to $2,725.4 billion – 0.15% of the Gross Domestic Product (GDP). The primary surplus target is the economic indicator of resources allocated for the payment of interest on public debt.

This evening (July 22), Finance Minister Joaquim Levy and Planning Minister Nelson Barbosa announced the new target, which is in the Assessment Report on Revenue and Expenses. Released every two months, the report provides updates on official economic parameters and tax collection, budget expenses, and cuts projections. It provides the basis for editing the decree setting the spending limits for each ministry.

According to minister Joaquim Levy, the new target helps to mitigate uncertainties related to the economy by adding transparency to public accounts. “We provide relevant information, which helps to guide important decisions of economic agents. Uncertainties arising from a range of sources have affected not only the economy, but also the federal tax collection. The Constitution and the Fiscal Responsibility Act provide a valuable mechanism to this end. Our strategy is to try to mitigate uncertainty and provide clear guidance,” he stated. Until now, the fiscal effort target at the federal, state and local levels was $20.6 billion (1.1% of GDP) for this year.

The amendment has to be ratified by Congress. The report reduced the revenue projection by $13.7 billion for 2015. Moreover, proposals for government spending cuts sent by Congress in recent months have been lowered, and proposals to increase revenue, including the reduction of payroll tax exemptions and repatriation of funds from abroad, are to be voted.

The government has also announced an increase in the budget cuts for this year, going from $21.7 billion to 24.7 billion.

*With additional reporting by Mariana Branco

Translated by Amarílis Anchieta

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