Brazil’s April Primary Budget Surplus Exceeds All Estimates

  • Seasonal windfall explains most of the surplus: Treasury head
  • Brazilian real adds to gains following release of budget data

Brazil’s central government posted a higher-than-expected primary fiscal surplus in April due to a seasonal windfall, a week after the government of Acting President Michel Temer obtained permission to close the year with the widest budget gap on record.

The surplus before interest payments, which excludes results of states, municipalities and state-owned companies, reached 9.8 billion reais ($2.7 billion) last month, when government revenue traditionally goes up, the National Treasury reported on Monday. The result followed a gap of 7.9 billion reais in March, and was bigger than the 2.4 billion-real surplus for April estimated by economists surveyed by Bloomberg.

The Brazilian real added to gains after the data was released. It strengthened 0.8 percent to 3.58 per dollar at 4:07 p.m. local time.

“The result is basically explained by the higher revenue we usually see in April,” Treasury Secretary Otavio Ladeira told reporters in Brasilia, forecasting recurring revenues to keep falling in coming months due to the economic recession.

Brazil’s new economic team headed by Finance minister Henrique Meirelles won Congress approval last week to post a primary deficit of 170 billion reais this year and avoid a government shutdown. Suspended president Dilma Rousseff in March asked lawmakers to allow a deficit of as much as 96.7 billion reais, already a stark revision of her prior goal of 24 billion-real surplus for 2016.

Ladeira said it isn’t clear yet whether the Treasury will incur a deficit as large as the authorized by Congress this year as there are many uncertainties ahead, including the renegotiation of debts owed by Brazilian states to the federal government.

Meirelles, who on May 20 said Brazil’s economic situation was worse than he anticipated, has proposed measures to cap spending and fix the budget gap in the medium term. The task is particularly difficult as government revenue drops during a second straight year of recession.

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