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Brazil Raises 2024 Budget Deficit Estimate to $5.2 Billion

By Martha Beck and Beatriz Reis
Pedestrians in front of the Central Bank of Brazil headquarters in Brasilia, Brazil, seen from the city's Bus Station on Tuesday, June 18, 2024. In Brazil, the central bank on Wednesday may well draw the line under its 325 basis-point easing cycle and keep the benchmark Selic at 10.5% amid unmoored inflation expectations and mounting government spending concerns. (Gustavo Minas/Bloomberg)

(Bloomberg) -- Brazil will end 2024 with a primary fiscal deficit of 28.8 billion reais ($5.2 billion), equivalent to 0.25% of gross domestic product, according to new government estimates published on Monday. 

That forecast puts the primary deficit, which excludes interest payments, at the limit of the tolerance range established in the nation’s fiscal framework. The government had previously forecast a gap of 14.5 billion reais for this year.

Brazil Finance Minister Fernando Haddad said last Thursday the government will freeze 15 billion reais in spending from this year’s budget to comply with the tolerance band that’s closely-watched by investors. The administration had sought to eliminate the primary budget deficit in 2024, but that would have required freezing at least twice the amount it did, according to estimates from economists at Itau Unibanco SA and Banco Santander SA.  

Treasury Secretary Rogerio Ceron told reporters that Brazil’s government is confident it will meet its 2024 fiscal target and will do what’s needed to do so. 

“The concerns are legitimate, and it is our role to reinforce that the path of our fiscal commitment remains the same,” Ceron said.

The spending freeze was due to be announced this week together with the new budget report, but the government decided to move faster to head off investor concerns about expenditures that have caused local assets to sell off. Without that change to expenditures, this year’s deficit forecast would have been 32.6 billion reais, according to Monday’s report.

In comments to reporters earlier on Monday, President Luiz Inacio Lula da Silva said the administration will freeze budget resources whenever it’s necessary and that fiscal responsibility is something he feels “in his guts.”

Lula had previously cast doubt on his commitment to the fiscal target, saying in a local TV interview that he is “not obligated to set a goal and stick to it” if he decides he “has more important things to do.”

(Adds comments from treasury secretary in fourth paragraph)

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