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REFILE-UPDATE 1-Brazil's CMN OKs 325 bln reais transfer to Treasury from central bank

(Corrects amount in headline)

BRASILIA, Aug 27 (Reuters) - Brazil’s National Monetary Council (CMN) on Thursday approved the transfer of 325 billion reais ($58.3 billion) to the Treasury from the central bank to help pay down the national debt.

The funds are part of the 478.5 billion reais of foreign exchange-related profits accrued by the central bank in the first half of this year, and will help ease a growing strain on the Treasury’s finances resulting from the COVID-19 pandemic.

Under a 2019 law, the transfer is permitted in times of “severe liquidity restriction” to pay public debt. According to the legislation, this is a necessary condition to enable the transfer.

The Treasury had initially indicated earlier this year it would seek up to 500 billion reais, but central bank President Roberto Campos Neto said recently the bank must not be seen to be directly financing the government.

Treasury Secretary Bruno Funchal said on Thursday the economy ministry had proposed a 445.2 billion transfer, and that the initial 325 billion could be increased at a later date if conditions warranted.

The Treasury’s cash balance at the central bank at the end of June was 646 billion reais. But record borrowing and debt due to the crisis, plus some 900 billion reais of debt to refinance next year, raised concern that the buffer could erode to worryingly low levels in the coming months.

The real’s steep slide against the dollar in the first half of the year helped boost the real-based value of the central bank’s assets by 478.5 billion reais.

The CMN is Brazil’s highest economic policy body which includes the economy minister and central bank president.

$1 = 5.57 reais Reporting by Jamie McGeever and Marcela Ayres; Editing by Sandra Maler and Richard Chang

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