Brazil : Record May deficit highlights budget challenge
Wed Jun 29 2016
Nikki Bailey (1073 articles)

Brazil : Record May deficit highlights budget challenge

BRASILIA :Brazil posted a primary budget deficit of 18.125 billion reais ($ 5.57 billion) in May, central bank data showed on Wednesday, the largest ever for the month of May as the government faces a battle to close what could be a record shortfall this year.

The deficit was above market expectations for a gap of 17.3 billion reais and came after a surplus of 10.182 billion reais in April.

The primary balance, or the fiscal result of the country before interest debt payments, is a key gauge of a country’s capacity to repay its debt. The overall deficit, which includes interest payments, rose to 60.623 billion reais in May.

Michel Temer, who as vice president replaced President Dilma Rousseff during her impeachment trial in the Senate, is proposing capping public spending to plug a deficit that is expected to swell to 163.9 billion reais in 2016.

May’s result was due mainly to a drop in the federal government’s revenues as the economy faces what could be its worst recession in a century.

The two-year-long recession and past fiscal mismanagement have raised fears among investors that Brazil will be unable to service its debt in coming years.

The country’s gross debt rose to an equivalent of 68.6 percent of gross domestic product in May from 67.5 percent the previous month. Brazil’s debt, already high when compared to other emerging economies, is expected to reach 80 percent of GDP as early as 2017.

($ 1 = 3.2568 Brazilian reais) (Reporting by Marcela Ayres; Writing by Silvio Cascione and Alonso Soto; Editing by Chizu Nomiyama and Bill Trott)

Nikki Bailey

Nikki Bailey

Nikki Bailey reports on US Stocks. She covers also economy and related aspects. She has been tracking US Stock markets for several years now. She is based in New York