Brazil’s government spending rises, driving higher-than-expected May deficit
2024.06.26 15:09
BRASILIA (Reuters) – Brazil’s central government posted a larger-than-expected primary budget deficit in May, pressured by increased pension benefits, the Treasury said on Wednesday.
The deficit excluding interest payments totaled 60.983 billion reais ($11.06 billion), larger than the 54.2 billion reais shortfall forecast by economists in a Reuters poll.
Government spending rose by 14% in real terms from a year earlier, driven by an uptick in pension benefits, compared to a 9% increase in net revenues.
Tax collection in Latin America’s largest economy has been hitting successive monthly records.
However, the market does not see this as enough to back the government’s fiscal target of erasing the primary deficit this year, due to the rapid expansion of many mandatory expenditures, and President Luiz Inacio Lula da Silva’s reluctance to cut spending.
In the 12 months through May, the central government’s primary deficit reached 2.36% of gross domestic product (GDP), said the Treasury.
Leftist President Luiz Inacio Lula da Silva said earlier on Wednesday in an interview with news outlet UOL that it was not possible to unlink the annual increase in a benefit for the elderly and disabled, the so-called BPC, from the growth of the minimum wage, which is annually adjusted above inflation.
Some members of his government had suggested that raising the BPC only by the inflation rate would be one of the alternatives presented to him for potential spending cuts.
The president also said his government is scrutinizing whether there are areas with excessive expenses.
“The problem is not having to cut. It’s knowing whether it is really necessary to cut or if it is necessary to increase revenue,” said Lula in comments that led the Brazilian real to extend its drop against the U.S. dollar.
($1 = 5.5149 reais)
