June 27, 2014 / 5:40 PM / 3 years ago

UPDATE 2-Brazil central government posts record May deficit

(New throughout, adds comments from Treasury chief, and background)

BRASILIA, June 27 (Reuters) - Brazil’s central government in May posted its widest-ever primary budget deficit for that month, a surprise shortfall that raises further doubts about whether President Dilma Rousseff can meet a key fiscal savings goal this year.

The central government, which includes results from federal ministries, the central bank and social security, posted a primary deficit of 10.502 billion reais ($4.77 billion) in May, the country’s Treasury said on Friday.

There was a surplus of 16.6 billion reais in April due to a surge in extraordinary revenues stemming from state companies’ dividends and concession premiums.

In the first five months of the year, the central government has achieved less than a quarter of the 80.7 billion-reais goal it set for 2014.

Treasury chief Arno Augustin told reporters in Brasilia that the surprise deficit was caused by a fall in tax revenue, but that the government believes it can reach its annual goal.

The government will get some extra cash from a decision to sell billions of dollars worth of offshore oil rights to state-run oil company Petroleo Brasileiro SA. Rating agencies warned on Friday that the price could strain company finances and hurt its credit-worthiness.

Augustin said Petrobras is expected to pay an initial 2 billion reais from that amount by the end of the year and that state development bank BNDES is set to contribute with 1 billion reais in dividends in June.

The government has resorted to extraordinary revenues such as dividend payments, overdue tax settlements and concession premiums to make up for almost stagnant tax revenues. Many economists say the use of one-off cash resources is not sustainable and hides deeper problems related to the government’s expansionary fiscal policies.

The central bank is scheduled on Monday to release the country’s consolidated fiscal results, which includes states and municipalities and is regarded as the benchmark for Brazil’s fiscal performance.

Brazil’s public finances have deteriorated under Rousseff as spending has grown while revenues have remained flat, leading Standard & Poor’s to downgrade the country’s sovereign debt rating closer to junk status earlier this year.

$1 = 2.20 Brazilian reais Reporting by Luciana Otoni; Writing by Alonso Soto; Editing by Chizu Nomiyama, Meredith Mazzilli and David Gregorio

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