Brazil sees massive fiscal gap, plans new measures
The federal government's primary budget deficit could reach a staggering 170.5 billion reais ($48.7 billion) in 2016, or the equivalent of 2.75 percent of gross domestic product. Last year the government posted a record deficit of 1.94 percent of GDP.
The new shortfall estimate will be the administration's primary deficit target, which needs congressional approval before the end of the month to avoid a government shutdown. The primary balance, which represents revenues minus expenditures before debt interest payments, is a closely watched gauge of creditworthiness.
Finance Minister Henrique Meirelles said the target could be reduced if Congress approves austerity measures to be proposed by the government in coming weeks.
He declined to detail the measures, but said they will help initially stabilize the growing debt burden and later reduce it to ease investors' fears over the country's financial health.
Meirelles, a former central bank chief respected on Wall Street, was appointed last week by interim President Michel Temer to plug an overall budget deficit that ballooned to 10 percent of GDP and cost Brazil its coveted investment grade rating last year.
"We will work with a target lower than what we announced," Meirelles said in a press briefing. "This is a realistic and transparent target."
He did not rule out future tax hikes, but said the new measures will focus on better use of public funds. ■