Brazil’s Treasury forecasts $3.3 billion deficit in 2024

3:48 pm Tuesday, December 03rd, 2024

By Marcela Ayres

BRASILIA (Reuters) – Brazil is set to achieve a primary deficit of 20 billion reais ($3.3 billion) this year, narrower than the maximum shortfall permitted under its fiscal rules, Treasury secretary Rogerio Ceron said on Tuesday.

The government’s goal is to eliminate the primary deficit, excluding interest payments, with a margin of 0.25% of gross domestic product, which means the 2024 target can be met with a deficit of around 29 billion reais.

Speaking at a press conference, Ceron said a recently announced fiscal package, which initially soured market sentiment, is now being better understood, but acknowledged that “the government’s work does not end there.”

“Our fiscal adjustment process is ongoing,” he said.

The package, which included spending containment measures deemed insufficient by markets and an unexpected income tax reform aimed at raising exemptions for the middle class, led to a sharp depreciation of the Brazilian real and a spike in interest rate futures.

Brazil’s deputy secretary for public debt, Otavio Ladeira, noted that the Treasury employs various strategies to navigate market volatility, including reducing issuance volumes. He said sovereign bond buybacks are a last-resort measure, reserved for scenarios of severe market dysfunction.

“We are far from that scenario,” Ladeira said.

According to Ceron, the fiscal package also grants the federal government flexibility starting next year to aim for the center of its fiscal target during budget management, addressing criticism that this year’s focus was on the target’s tolerance band.

Earlier on Tuesday, the Treasury reported that the central government recorded a primary budget surplus of 40.8 billion reais ($6.7 billion) in October, reducing the year-to-date deficit to 64.4 billion reais.

The performance was driven by a real increase of 10.9% in net revenues compared to the same month last year, while expenditures dropped 0.7% over the same period.

In 12 months, the deficit now corresponds to 1.9% of gross domestic product.

($1 = 6.0673 reais)

(Reporting by Marcela Ayres; Editing by Leslie Adler)