UPDATE 1-deficit Brazil’s public sector 2020 heading for 500 billion reais | Instant News


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By Jamie McGeever and Isabel Versiani

BRAZILIA, April 7 (Reuters) – Brazil’s emergency spending to combat the coronavirus crisis will “comfortably” produce an extensive public sector deficit this year of up to 500 billion reais ($ 95 billion), Finance Minister Mansueto Almeida said on Tuesday.

That will be more than eight times greater than last year’s shortfall, including the central, state and city governments, of around 61 billion reais, but is fully justified, Almeida said.

“Last year’s fiscal gap was around 61 billion reais. This year we are comfortably heading for around 450-500 billion reais, “Almeida said in a direct debate guided by the newspapers O Globo and Valor Economico.

But even though he insisted the government would spend whatever was needed this year to help people and businesses overcome the economic hardships caused by the corona novel virus, Almeida warned that spending from next year onwards must be brought back under control.

Almeida said it would be a “mistake” to allow emergency measures taken this year to turn into permanent expenditure, which could put strained public finances under even greater long-term pressure.

S&P Global Ratings on Monday lowered the outlook for Brazil’s sovereign debt to “stable,” citing a major fiscal effort to soften the economic blow from the coronavirus outbreak which is likely to expand the government’s nominal fiscal deficit to 12% of gross domestic product from 6% last year

Almeida said Brazil’s national debt will rise this year, although with the central bank cutting interest rates to record lows, the cost of paying off the debt will go down.

S&P and Moody’s both estimate Brazil’s gross debt will rise to 85% of GDP this year, but both believe the government will continue efforts to get public finances under control once the corona virus crisis is over. (Reporting by Jamie McGeever and Isabel Versiani Editing by Chizu Nomiyama and Paul Simao)

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