Brazil's January Primary Budget Surplus Beats Analyst Estimates

  • Surplus before interest payments was 14.8 billion reais
  • Data reflects higher tax revenue and income from hydro auction

The central government’s primary budget surplus exceeded analyst estimates last month, as a jump in tax revenue pulled Brazil out of deficit territory for the first time since April 2015.

The surplus, which excludes interest payments as well as municipalities and government-run companies, was 14.8 billion reais ($3.8 billion) in January, the Treasury said Thursday. The median forecast of economists surveyed by Bloomberg was for a surplus of 11.7 billion reais. Investors and credit rating companies use the primary budget result to gauge Brazil’s fiscal health.

The surge in tax collection was typical for the first month of the year and also reflected an inflow of money from a government hydroelectric auction. The revenue provided President Dilma Rousseff’s economic team some respite as it struggles to shore up fiscal accounts, which are expected to deteriorate in 2016. Analysts surveyed by the central bank forecast the government will post a primary deficit this year and next, as an economic downturn saps fiscal revenue and Congress balks at spending cuts.

The real appreciated following publication of the budget number to 3.94 per U.S. dollar, extending the day’s gain to 0.4 percent.

The Rousseff administration will ask Congress to lower its fiscal target for this year to a primary deficit rather than its original goal of a surplus. If lawmakers don’t approve the latest request and the government misses the original target, the administration will be in violation of fiscal laws.

Moody’s Investors Service took note of Brazil’s fiscal troubles when it cut its sovereign credit rating to junk this week, making it the third ratings company to take away the nation’s hard-earned investment-grade status.

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