Brazil's Finance Minister Dario Durigan says the government will pursue a higher effective primary surplus next year, without naming a figure. He spoke after a selloff across Brazilian markets tied to fiscal concerns over Lula's reelection. The Treasury also intervened in the bond market on Monday.
Brazil's government will pursue a higher effective primary surplus next year, Finance Minister Dario Durigan told local news service Broadcast on Monday. He did not specify a figure.
The comments followed a sweeping selloff across Brazilian markets, triggered by fiscal concerns over the reelection of leftist President Luiz Inacio Lula da Silva. Durigan also said the government plans to send legislation to Congress this year requiring policymakers to formally target the midpoint of the primary balance goal.
Treasury steps into the bond market
Durigan said the Treasury canceled scheduled debt auctions and conducted extraordinary buyback operations on Monday. The aim was to bring rationality to trading after a sharp jump in long-term interest rate futures triggered by the election, he said.
What the fiscal target says
Brazil's fiscal target for next year calls for a primary surplus of 0.5% of GDP, excluding interest payments, with a tolerance band of 0.25 percentage point on either side. However, under the fiscal framework the government can exclude certain expenditures when assessing compliance, most notably part of its stock of court-ordered debt payments.
In August, the government projected an effective primary surplus of 0.1% of GDP for next year. If achieved, it would be Brazil's first fiscal surplus since 2022.
Most investors and economists, however, view that pace of fiscal consolidation as too slow given the rapid growth of mandatory spending, which pushes investors to demand ever-higher premiums to hold Brazilian debt. Brazil's gross public debt, the government's main solvency indicator, is up more than 10 percentage points during Lula's current term to 82.9% of GDP.
Source: Investing.com (Reuters)
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