(Bloomberg) -- Brazil’s real extended losses after Finance Minister Fernando Haddad refused to confirm the amount of spending cuts the government is considering, saying he didn’t know where numbers reported by local newspapers had come from.
President Luiz Inacio Lula da Silva’s government is currently crafting a series of measures meant to reduce spending amid increasing investor fears over the size of Brazil’s fiscal deficits.
Lula, however, wants more information about the proposals the finance and planning ministries are considering, and the president will ultimately decide the size of the package and when it is announced, Haddad told reporters Tuesday in Brasilia.
Earlier in the day, local newspaper O Globo reported that the government was weighing cuts of between 30 billion and 50 billion reais ($8.7 billion), but Haddad said no such decision had been made.
The real continued its slide on a day in which Latin American currencies have broadly weakened, as Haddad’s comments added to uncertainty about the size and timing of spending cuts. Brazilian stocks hit lows for the day and swap rates rose across the curve.
Skittish investors have been anxiously awaiting news about the spending reductions since Planning Minister Simone Tebet earlier this month pledged that the government would unveil “as many measures as possible” after municipal elections that took place Sunday.
Fiscal fears have weighed on Brazilian assets throughout the year, turning the real into one of the world’s worst-performing major currencies.
Haddad met Lula on Monday to discuss the plans, further fueling expectations that an announcement may be imminent. Both Tebet and Haddad have stressed that the cuts need the approval of Lula, who has previously expressed skepticism about the need to curb spending.
“The delay in publishing the spending cut plan gives the market room to distrust the government’s real intention,” said Paulo Nepomuceno, a trader on Mirae Asset’s derivatives desk.
The economic team is considering measures that would limit the growth of some social programs so they will remain under the rules of the country’s so-called fiscal framework, according to people with knowledge of the matter. That would cap the growth of those programs at 2.5% over inflation per year, in accordance with fiscal rules.
--With assistance from Andre Loureiro Dias and Felipe Saturnino.
(Updates with comments and context from fifth paragraph)
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