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Financial News: BRAZIL: Government Faces Difficulties With Public Spending

BRAZIL: Government Faces Difficulties With Public Spending Golden Rule

05/30/2018 - 20:45:00 (RTTNews)

(RTTNews) - The Brazilian government will face a hard time in 2018 and in the next few years to comply with the so-called "golden rule" of public expenditures, which forbids debt issuance to finance current expenses, according to a report from the Treasury Department.

The document points that the federal government would have to raise R$ 181.9 billion this year to comply with the golden rule. A large part of that money - R$ 100 billion - would come from early repayments of the Brazilian National Development Bank (BNDES) to the Treasury.

Other resources would come from ending the Brazilian Sovereign Fund (R$ 27 billion), closing a national development fund (R$ 16 billion) and canceling some public expenditures from previous years that have not yet been implemented (R$ 20 billion). The Treasury also pointed to R$ 18.9 billion that would come from unrevealed sources.

In 2019, however, the problem would continue, with a R$ 260.2 billion gap. In 2020, that shortage rises to R$ 307.3 billion, while in 2020 it reaches R$ 228.4 billion, according to the Treasury estimates.

The document, however, does not explain how would the government cope with the lack of resources in those years.

"It is evident that, to comply with the golden rule this year and in the next years, a series of measures to reduce budget rigidity is needed, together with a fiscal restructuring that cuts current expenses and/or increases revenues," the government said.

The other option would be for the government to request Congressional approval to borrow money in excess of the golden rule limits.

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