September 19, 2019 / 7:34 PM / a month ago

Exclusive: Brazil to free up 12.5 billion reais to ease budget squeeze - source

BRASILIA (Reuters) - Brazil’s government will free up 12.5 billion reais ($3 billion) for discretionary spending in its latest bi-monthly spending and revenue report, an Economy Ministry source told Reuters on Thursday.

The move, to ease the pressure on departmental budgets following spending freezes totalling 34 billion reais this year, will be announced on Friday, the source said, speaking on condition of anonymity.

In broad terms the 12.5 billion reais will come from an anticipated 6.5 billion increase in revenues, mostly from tax and dividend payments, and a 6 billion reais decrease in non-interest payments, particularly on salaries and benefits.

The unlocking of resources is seen as crucial to relieving the pressure on the public sector and ensuring it continues to function following the deep freeze on spending earlier in the year.

The government has committed to posting a primary deficit this year of 139 billion reais, a goal that has been made harder to reach due to the economy’s sub-par growth and the resulting shortfall in tax revenue.

But after contracting 0.2% in the first quarter, the economy grew 0.4% in the second, and Economy Ministry officials are confident a corner has been turned.

Earlier this week, Economy Minister Paulo Guedes said the government would free up to 22 billion reais in the coming months, and last week presidential Chief of Staff Onyx Lorenzoni told Reuters it could be around 20 billion reais. ($1 = 4.14 reais)

Reporting by Marcela Ayres; Writing by Jamie McGeever; Editing by Chris Reese and Cynthia Osterman

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