March 22, 2018 / 6:34 PM / a year ago

Brazil government freezes $606 million in federal spending

BRASILIA (Reuters) - Brazil on Thursday froze 2 billion reais ($606 million) worth of 2018 federal spending as officials continue to grapple with ballooning expenses.

In a report, the government increased its forecast for federal revenue net of interest payments by 2.276 billion reais, to 1.463 trillion reais. The increase amounted to a meager 59.9 million reais when excluding transfers to regional governments, however.

In comparison, the estimate for federal expenses rose 2.698 billion reais to 1.374 trillion reais, yielding a primary deficit of 157.4 billion reais, slightly below the target for a deficit of 159 billion reais.

The revision highlights President Michel Temer’s struggles to implement austerity measures ahead of the most wide-open and hard-to-predict presidential elections in decades.

After giving up on plans to revamp the costly social security system, Temer’s unpopular administration has been struggling to pass a bill raising payroll taxes in Congress.

Accordingly, the government stopped taking that bill in account in budget estimates, with an impact of 8.9 billion reais on the estimated 2018 budget deficit.

“Whenever the risk that a bill is not approved becomes relevant, as is the case with this measure, it should be removed from our estimates,” the secretary for the federal budget at the Planning Ministry George Soares said at a news conference.

The government also earmarked 1 billion reais in spending it might dedicate to an ongoing federal intervention in the state of Rio de Janeiro, the report said.

Brazil’s federal government ordered the army to take over command of police forces in Rio de Janeiro state in a bid to curb violence driven by drug gangs that have, according to Temer, “virtually taken over” Rio’s metropolitan area.

($1 = 3.3013 reais)

Reporting by Marcela Ayres; Writing by Bruno Federowski; Editing by David Gregorio

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