Worsening in Brazil accts only temporary - cenbank
Reuters, Friday, February 27, 1998 at 01:52
By Joelle Diderich
BRASILIA, Feb 26 (Reuters) - Brazil's fiscal accounts
worsened sharply in December due to high state and municipal
spending, but should return to normal by January, a Central
Bank director said.
"The figures will go back to normal (in January)," Altamir
Lopes, head of the bank's economics department, told reporters
after the release of government budget figures.
In primary terms, which exclude debt costs, Brazil posted a
budget deficit of 0.67 percent of gross domestic product (GDP)
in the 12 months to December, the first deficit after eight
consecutive months of surpluses.
The figure fell far short of the government's target of a
primary budget surplus of 1.5 percent of GDP in 1997.
Spending by states and municipalities, as detailed in the
primary budget figures, soared to a whopping 5.136 billion
reais in December from 77 million reais in November.
The nominal deficit, or public sector borrowing
requirement, widened to 5.89 percent of GDP in the 12 months to
December from 5.14 percent in the year to November, reflecting
the jump in spending as well as a shortfall in social security
coffers.
Lopes said the increase in state and municipal spending was
partly due to the payment of mandatory Christmas bonuses.
Many states failed to pay 1996 bonuses until January 1997
but paid 1997 bonuses on time, so figures for last year as a
whole included two sets of Christmas benefits.
In addition, states did not use all their privatization
receipts to service government debt, but instead diverted some
of the money to wipe other costs off the slate.
"Many states that held privatizations used that income for
investment or to pay costs," Lopes explained. "They took
advantage of these revenues to liquidate charges that are not
included in their debt, such as legal guarantees."
If privatization proceeds had been included, Brazil would
have registered a primary budget surplus of 10.946 billion
reais in 1997 instead of a deficit of 5.998 billion reais, he
said.
"If states had used revenues to reduce their debt, it would
have been much more beneficial," he commented.
Despite the high level of spending in December, Lopes saw
improvement throughout 1998 and said the government aimed to
end the year with a primary budget surplus of 2.3 percent of
GDP.
The January figures should already show a return to
"normal" levels, as they will exclude the delayed Christmas
bonuses paid at the beginning of 1997, Lopes noted.
"Then you will be able to tell if there was a real
cleaning-up of the books," he said.
He said the rise in Brazil's net public sector debt to 34.3
percent of GDP in December from 33.4 percent of GDP in November
was mainly due to the government taking on public sector
company debt, in particular in Sao Paulo state.
"There was a drop in bank debt and a rise in federal
domestic debt, which gives rise to interest payments," Lopes
said. "The government took on 11 billion reais of debt owed by
Sao Paulo state-owned firms."
joelle.diderich@reuters.com))
Copyright 1998, Reuters News Service |
