Brazil Will Propose Lower Fiscal Target, Budget Leader Says

Updated on
  • Minister Levy has said relaxed goal puts credit rating at risk
  • Congress expected to vote on budget this week or next

Brazil’s government will ask Congress to relax its budget target for next year, in a move Finance Minister Joaquim Levy has cautioned could lead to further credit downgrades.

President Dilma Rousseff’s supporters on the congressional budget committee will introduce an amendment to the 2016 budget bill that would allow the administration to shoot for a surplus before interest payments of 0.5 percent of gross domestic product, said Paulo Pimenta, the government’s leader on the committee. Rousseff previously wanted to target a so-called primary surplus of 0.7 percent.

Brazil hasn’t posted a primary surplus since April.
Brazil hasn’t posted a primary surplus since April.

The amendment would allow the administration to report a balanced primary budget -- with no deficit and no surplus -- if tax revenue falls short of expectations, Pimenta said Tuesday. Legislators are expected to vote on the budget bill this week or next in a joint session of Congress. The Finance Ministry and presidential press offices didn’t respond to e-mail requests for comment made after business hours.

Levy has repeatedly emphasized the importance of shoring up fiscal accounts, and said as recently as last week that setting a lower target could threaten Brazil’s credit rating. The proposed amendment would be the latest in a series of setbacks for the minister and would mark growing opposition to his push for austerity amid a deepening recession. Levy has complained to Rousseff that her allies haven’t supported his belt tightening measures and frequently denied rumors he would quit in protest.

The proposal also comes just days after Moody’s Investors Service threatened to follow Standard & Poor’s lead by withdrawing the nation’s investment-grade status. Moody’s cited Brazil’s deteriorating fiscal accounts and a political stalemate that has been exacerbated by the start of impeachment proceedings against the president.

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