BRASILIA, Oct 20 (Reuters) - Brazil’s government is considering slashing its key fiscal goal to a deficit of around 50 billion reais ($12.9 billion) this year as revenues plummet due to the ongoing recession, three sources with direct knowledge of the talks said on Tuesday.
That primary budget deficit would be equal to 0.85 percent of the country’s gross domestic product, the largest on record. It would wipe out the previous goal for a surplus of 0.15 percent of GDP. Brazil’s primary surplus, or savings prior to debt payments, has turned into a small deficit in recent years while the overall budget shortfall has ballooned above 8 percent of GDP.
“The drop in revenues was sharper than expected,” a lawmaker involved in the negotiations told Reuters on condition of anonymity. “That number is not final yet, hopefully we will have it ready for tomorrow.”
Internal government discussions have been ongoing between members of President Dilma Rousseff’s economic team in an effort to reach consensus on the matter, the sources said.
The change in the primary budget target has to be approved by Congress. The new target was expected to be voted this week in a bicameral budget commission.
Two other government officials confirmed that the deficit could be between 0.50 to 0.85 percent of GDP. It would be the second straight annual deficit, underscoring the disarray of public accounts.
A sharp drop in investment and plummeting consumer confidence has dragged the economy into its worst recession in 25 years. The Brazilian economy is expected to contract around 3 percent this year, according the latest weekly central bank poll of private economists.
Last year Brazil posted its first primary deficit ever with a shortfall of 32.5 billion reais, according to central bank data.
The government has not ruled out a bigger projected deficit to avoid more changes this year, said the sources, who asked for anonymity because they were not allowed to speak publicly.
President Dilma Rousseff will decide on the new target between Tuesday and Wednesday, recalculating due to a sharp drop in tax revenues and failure to approve legislation that would have bolstered government finances, one of the sources said.
Rousseff, who has been accused of manipulating the budget last year to try to cover a massive deficit, has said she is committed to rebalancing the accounts to regain the confidence of investors.
$1 = 3.88 Brazilian reais Reporting by Alonso Soto, Lisandra Paraguassu and Patricia Duarte; Editing by Diane Craft