Brazil’s Finance Minister Joaquim Levy is seeking to freeze as much as 17 billion reais ($5.6 billion) more from this year’s budget than Budget Minister Nelson Barbosa, according to a government official with direct knowledge of the discussions.
Levy wants reductions of 75 billion reais to 77 billion reais, according to the official. Barbosa is studying plans to eliminate 60 billion reais to 65 billion reais in expenditures, the official, plus another government source, said. They both asked not to be identified because the talks aren’t public. The government by law has until May 22 to announce the spending cut.
Dilma Rousseff pledges to shrink the federal debt to avert the second credit-rating downgrade of her presidency. While some of her proposals to raise taxes and reduce spending must pass through the lower house and Senate, the government can freeze spending from this year’s budget without congressional approval.
The real weakened 2.6 percent to 3.0518 per U.S. dollar at 3:19 p.m. Sao Paulo time.
Vice President Michel Temer, who alongside Levy has led negotiations with legislators on government austerity measures, told reporters on May 4 that budget cuts would be “radical” if they don’t approve Rousseff’s belt-tightening proposals.
The lower house three days later passed a modified version of the first piece of legislation in Rousseff’s agenda to reduce the budget. The decree, which would reduce government spending on unemployment insurance, now goes to the Senate.
The Planning and Budget Ministry press office declined to comment about the size of budget cuts. The Finance Ministry press office said the reductions haven’t been finalized.