• Rousseff's government freezes discretionary spending
  • Congress to vote on legislation fixing primary gap for 2015

Brazil’s October primary budget deficit was smaller than forecast by economists, as the government halts discretionary spending until Congress approves a revised budget target.

Brazil’s budget deficit before interest payments in October was 11.5 billion reais ($2.99 billion dollars), less than all but three forecasts from 20 economists surveyed by Bloomberg, whose median estimate was for a 12.9 billion reais deficit. That brings Brazil’s primary budget deficit as a percentage of GDP to 0.71 percent in the preceding 12 months.

The government is still officially targeting a primary surplus for full-year 2015, and has urged Congress to approve a new target with a deficit. Such efforts have been undermined by gridlock as the nation’s largest-ever corruption scandal threatens political leaders, and last week toppled the government’s Senate leader. President Dilma Rousseff issued a decree Monday freezing discretionary expenditures, which may ramp up pressure on lawmakers to vote on the proposed target.

Finance Minister Joaquim Levy is asking Congress to approve legislation that would relax the target and allow for a primary deficit of 120 billion reais this year, including overdue payments to state banks and other institutions.

The government’s primary deficit in the 12 months through October was 40.9 billion reais. Rousseff’s decree on Monday trimmed about 10.7 billion reais from this year’s spending budget, according to the press office of the Planning Ministry. Legislators are expected to vote on the new fiscal target Dec. 1 after repeated delays.

Original Target

If Congress doesn’t pass the bill, the administration must either meet the original target for a primary surplus or violate the budget law. Any breach of that law could provide grounds to open impeachment proceedings against the president, according to University of Sao Paulo law professor Jose Mauricio Conti.

Levy has said the government will aim for a primary surplus of 0.7 percent of GDP in 2016. The October nominal budget deficit was 29.4 billion reais, compared with a median estimate for a 34.1 billion-reais gap.

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