March 17 Mon Mar 17, 2014 8:20am
(Reuters) – Brazil’s social security deficit this year was underestimated by about 10 billion reais ($4.3 billion) by the government, Social Security Minister Garibaldi Alves told the newspaper Valor Economico, raising questions about the country’s ability to meet its fiscal savings target this year.
A social security deficit of 40.1 billion reais in 2014, as estimated by President Dilma Rousseff’s economic team, is “completely unreal”, Alves told Valor in an interview published on Monday. Instead, he estimated the deficit will be somewhere near the 49.9 billion reais mark recorded in 2013.
“That number was not discussed with us. It is not our expectation,” the minister said in the interview.
A spokesman for the Finance Ministry was not immediately available for comment.
In an attempt to regain market confidence and avoid a downgrade of its credit rating by Standard & Poor’s, Brazil this year pledged to deliver a primary budget surplus of 90 billion reais, or 1.9 percent of its gross domestic product. The primary surplus measures the government’s savings before debt service payments.
An unaccounted deficit of 10 billion reais represents more than 12 percent of the 80.8 billion reais surplus the federal government has promised to deliver this year. Another 9.2 billion reais in savings are expected to be produced by state governments and municipalities.
While initially cheering this year’s government fiscal target as more realistic, many economists are warning it could still be difficult to achieve due to spending pressures related to Rousseff’s reelection bid in October.
Brazil has failed to achieve its primary budget goal in the last two years as Rousseff increased public spending and gave up billions of dollars in revenues by granting a slew of tax breaks aimed at reactivating the economy.
Shrinking primary surpluses have raised the country’s overall budget deficit, which includes interest payments, to a three-year high of 3.28 percent of GDP. In 2012, the deficit was 2.48 percent of GDP.
The widening deficit and increased debt servicing costs have left limited room in the budget to bolster public investment at a time when the economy is struggling to take off.