Home Business Brazil Needs Fiscal Adjustment About R $300 Billion to Halt Debt Growth

Brazil Needs Fiscal Adjustment About R $300 Billion to Halt Debt Growth

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Calculation of the adjustment is from banks and consultancies; economists say that in addition to pension reform, the government will need to review various tax expenditures and change benefit rules.

The economic team led by Paulo Guedes will have to promote a fiscal adjustment of approximately R $ 300 billion to leave public accounts in the blue and manage to staunch the country’s indebtedness.

The amount, calculated by banks and consultancies heard is the effort that Brazil has to make to get out of the current deficit situation and re-register a primary surplus (the economy that the government makes to pay interest on the public debt, when revenues outstrip costs) to prevent the increase in gross debt.

This year, the government’s goal  still defined by Michel Temer administration  is a primary deficit of R $ 132 billion (or 1.8% of GDP). In the economists account, only a primary surplus of more than 2% of GDP will be sufficient to control gross debt  an important indicator of the quality of public accounts and widely analyzed by credit rating agencies in assessing countries’ credit scores.

Since 2014, the Brazilian economy has picked up successive deficits, which has led to an accelerated increase in the country’s debt. Brazil lost its investment grade in 2015.

Analysts now estimate that if all necessary measures are implemented, debt stabilization should only take place in the middle of the next decade, around 2025. The country needs a very large fiscal turnaround, says Gabriel Leal de Barros, director of the Independent Tax Institut (IFI). It will not just be a measure that will make all the adjustment.