Brazil posted a budget primary surplus of 3.5 billion Reais (1.75bn dollars) in March, recovering after a deficit in February, but still the worst performance in the first quarter of the last four years, according to central bank data released this week.
The primary budget balance, which represents the public sector's excess revenue over expenditures before debt payments, is a gauge closely watched by investors because it measures a country's ability to service its debt.
The nominal or fiscal budget for March which takes into account all items was a deficit of 15.85bn Reais
The Brazilian government missed its primary surplus target in 2012 and this year seems to be on the same track since in the first quarter the surplus was 30.7 billion Reais (approx 15.36bn dollars).
Brazil in an agreement with the IMF uses the primary surplus as a reference of the government’s accounts and of its capacity to address capital and interest debt payments.
The Brazilian government primary surplus target for the twelve months of 2013 was originally 155.9bn Reais (approx 78bn dollars) but in the last year to March the surplus has only reached 89.7bn Reais (approx 44.9bn dollars).
The budget surplus has been eroding for months as the government adopts measures to address the consequences of the international economic situation, by propping the most affected sectors with the freeze or temporary suspension of taxes and soft loans.
Tulio Maciel head of the Central Bank Economic Department admitted that the March results were ‘disappointing’ and that in the first quarter much can be tracked to the significant reduction of the tax burden for those sectors most affected and the elimination of the employers’ levy on payrolls as a way to help create jobs.
“Economic activity is showing a recovery, but we still have a mismatch before the recovery of revenue”, said Maciel who insisted that the measures implemented by the government of President Dilma Rousseff are beginning to give positive results.
“Exemptions will remain until recovery consolidates”, added Maciel.
The central bank official admitted that Brazil is having difficulties to meet the primary surplus target since 2009 as a consequence of the global crisis which has meant the government has suspended collection of certain taxes and also because of a slower domestic economic activity.
Brazil last year had a primary surplus of 52.5bn dollars, less that in 2011 (64.35bn dollars) and almost 25% lower than the target established for the twelve months, 69.9bn dollars.