Brazil plans 25 bln reais 1999 budget cut - papers
Reuters, Tuesday, October 06, 1998 at 09:17
RIO DE JANEIRO, Oct 6 (Reuters) - Brazil's economic team,
working feverishly to contain a soaring public deficit during a
period of international investor unease, plans 25 billion reais
in budget cuts in 1999, local newspapers reported Tuesday.
"The budget adjustment will be dramatic, definitive and
permanent," Demosthenes Madureira de Pinho Neto, the Central
Bank's director of foreign operations, was quoted as saying in
Rio de Janeiro newspaper Jornal do Brasil.
Pinho Neto was part of the economic team negotiating a
precautionary funding agreement with the International Monetary
Fund (IMF) to help Brazil weather global financial turmoil.
Other newspapers quoted Pinho Neto and Central Bank
governor Gustavo Franco in Washington as saying spending cuts
in 1999 would be around 25 billion reais ($21 billion).
Franco stressed that the new economic program would not
involve a devaluation or an acceleration of Brazil's
crawling-peg exchange rate policy that has been gradually
easing the local currency, the real, against the U.S. dollar.
The IMF's chief economist Michael Mussa said on Sunday that
it was "conceivable" Brazil could speed up the rate of
depreciation against the dollar to one percent a month from 3/4
of a percent at present.
But Franco firmly denied the suggestion, telling investors
and analysts that it was "not conceivable".
"In no circumstances do we conceive of a change in the
exchange rate regime," he said.
Pinho Neto said the budget adjustment would be about 3
percent of gross domestic product (GDP).
Franco said there would be a ceiling put on state spending
and if the states surpassed it, taxes normally distributed to
them would be retained and used to cover the difference.
Brazil's fiscal deficit is almost 8 percent of GDP and
economists say the government needs to save about $20 billion
next year to bring it into line and restore confidence.
tracey.ober@reuters.com))
Copyright 1998, Reuters News Service |
