Brasília – The Brazilian federal government announced this Monday (14th) that its 2016 Budget will include a R$ 26 billion cut (US$ 6.7 billion). Finance minister Joaquim Levy and Planning minister Nelson Barbosa made the announcement at government seat Palácio do Planalto. The cuts are intended to enable a primary surplus (savings intended to cover interest on the national debt) of 0.7% of Gross Domestic Product (GDP) next year.
By announcing the spending cuts, the government hopes to regain credibility among international investors. On August 31st, Brazil’s Executive branch submitted the 2016 draft budget to National Congress anticipating a R$ 30.5 billion deficit (US$ 7.8 billion). A week later, Standard & Poor’s downgraded Brazil’s credit rating from BBB- to BB+, meaning that the country is no longer regarded as investment-grade.
Besides the spending cuts, Levy reported that the government intends to levy a 0.2% tax along the lines of the now-defunct Contribuição Provisória sobre Movimentação Financeira (CPMF – Provisional Contribution on Financial Transactions). The goal is to collect R$ 32 billion (US$ 8.2 billion).
The government is also planning to review tax breaks and raise taxes in an effort to reach the total fiscal adjustment target of R$ 64.9 billion (US$ 16.7 billion), including spending cuts and higher revenue collection.
Some of the measures need approval from the National Congress.
*With information from the ANBA Newsroom. Translated by Gabriel Pomerancblum
