Brazil's Govt Tightens Controls On Spending - Malan
Dow Jones Newswires
BRASILIA -- The Brazilian government unveiled Tuesday a series of
fiscal measures, including tighter controls on spending and budget
cutbacks, to reduce the public deficit and bolster the economy during the
global financial crisis.
Finance Minister Pedro Malan announced in a news conference the
creation of a commission of fiscal control and management as well as a cut
in 1998 spending of 4 billion reals (BRL) ($1=BRL1.17), equal to around
4% of total expenditure.
Malan said the government put an "immediate brake" on overspending by
decreeing that ministries may not exceed 80% of their 1998 budgets
before Oct. 31.
The government is also developing a three-year deficit reduction plan
which it will send to Congress by Nov. 15.
He denied that the measures constituted a fiscal "package" - a term used
by the media over the weekend in anticipation of austerity measures. The
government, less than one month away from elections, has repeatedly
avoided the term.
Brazil's public deficit now accounts for 7% of gross domestic product
(GDP).
The measures presented by Malan will be published in the Official Gazette
on Tuesday in one decree and one provisional measure.
The markets had been expecting some sort of fiscal austerity measures
after the government announced Friday a tightening in credit which will
lead to higher rates on domestic debt and therefore higher debt servicing
costs.
"This is the appropriate macroeconomic answer given the adverse
climate," Malan said. "But I recognize that there is not only one response."
In terms of the 1999 budget, which was sent to Congress last week, the
government hasn't made any specific cutbacks. But the government is
empowered to limit spending in the future to ensure a primary budgetary
surplus of BRL8.7 billion in 1999, up from a surplus of BRL5 billion for
1998.
The primary surplus is current revenue minus current expenditures.
Brazil's government still doesn't make forecasts for the nominal balance,
which includes debt servicing payments, equal to some 6% of GDP. But
the measures announced Tuesday include a plan to develop nominal
balance goals and the mechanisms to ensure they are met.
Malan also said the current international turbulence forces Brazil to make
progress on its structural reforms.
He cited industrial restructuring and the reform of the government and its
institutions as the three key structural changes needed.
"We aren't going to give up in our determination to continue this process,"
Malan said.
He also called for a greater involvement by Congress in dealing with the
fallout of the financial crisis.
At the same news conference, which was televised live, Planning Minister
Paulo Paiva said Brazil will halve its public deficit in the next few years. He
said the government's decision to draw up a three-year fiscal plan for
1999-2001.
The new fiscal commission, which will be in charge of overseeing the
budget for the next three years, will meet for the first time next week,
Paiva said.
-By Mary Milliken; (55-11) 813-1988; mmilliken@ap.org |
