Brazil Surprises Analysts With Worst Primary Budget Gap of Year

  • Treasury reports primary budget deficit of 12.3 billion reais
  • Median estimate of analysts was gap of 10 billion reais

Brazil’s central government surprised analysts on Thursday by posting the worst primary budget deficit in over a year, underscoring the administration’s challenges in shoring up fiscal accounts.

The gap, which excludes interest payments as well as municipalities and government-run companies, was 12.3 billion reais ($3.3 billion) last month, Brazil’s Treasury reported. It was the worst performance for October on record. The median estimate of 24 economists surveyed by Bloomberg was for a primary deficit of 10 billion reais following a gap of 6.9 billion reais in September.

The government is struggling to close its budget gap as the deepest recession in over two decades curtails tax revenue and increases pressure to delay spending cuts. Political turmoil meanwhile has frustrated government efforts to win approval of new taxes in Congress, such as a levy on banking transactions known in Brazil as the CPMF.

The real depreciated 0.4 percent to 3.7599 per U.S. dollar at 3:35 p.m. local time. The decline follows arrests this week of high-profile public figures that have intensified the political crisis and rekindled concern about the administration’s ability to win approval of fiscal-austerity measures.

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