Brazil's primary budget surplus tops expectations in October

An aerial view shows Paraisopolis slum and buildings from Morumbi neighbourhood in Sao Paulo, Brazil October 27, 2022. REUTERS/Amanda Perobelli

BRASILIA, Nov 29 (Reuters) - Brazil's central government posted a better-than-expected primary budget surplus in October, Treasury data showed on Tuesday, as federal revenues continued to surprise on the upside.

The primary surplus totaled 30.8 billion reais ($5.8 billion), above the 25.7 billion reais surplus expected by economists polled by Reuters.

Tax revenue hit a monthly record in October, lifted by oil royalties and robust collection from companies and fixed-income investments after the central bank aggressively hiked rates to battle inflation.

In the 12 months to October, the central government recorded a primary surplus of 85.7 billion reais, equal to 1.02% of the gross domestic product.

The Treasury said in a statement that the annual primary budget surplus is expected to reach 0.4% of GDP, its first surplus since 2013, helped by booming revenues and the country's constitutional spending cap.

The cap limits the expansion of public expenses to the previous year's inflation. President-elect Luiz Inacio Lula da Silva, a frequent critic of the cap, has promised to abolish it.

Lula's transition team has requested Congress approve a multibillion-dollar waiver to increase welfare spending next year.

The Treasury said Brazil should continue its fiscal consolidation effort amid uncertainties abroad.

"It is important for the country to continue its efforts towards fiscal consolidation, especially in a global context in which lower growth and higher interest rates are expected in the coming years, a combination that will require a greater contribution from primary accounts to the sustainability of public debt," it said.

($1 = 5.2928 reais)

Reporting by Marcela Ayres; Editing by Lisa Shumaker

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