Brazil's government needs to slash spending on pensions and workers' salaries to free up funds for investment in a bid to stoke economic activity, the Organisation for Economic Co-operation and Development said in a report on Friday.
Brazil, Latin America's largest economy, has largely benefited from an increase in tax revenue in the past years to keep a strong fiscal performance, the OECD said. The consequence of the high tax burden, however, has been lacklustre economic growth.
"Brazil's overarching macroeconomic challenge is to continue to reduce the public debt overhang while improving the quality of fiscal adjustment, which has so far been underpinned by revenue hikes, rather than a retrenchment of expenditure commitments," the OECD said in the report. Public debt management the past years in Brazil has been "exemplary" though the government has done little to cut current spending, it said.
The OECD said the government should focus on putting a cap on expenditures and eventually target a zero nominal budget deficit, instead of a primary surplus that does not take into account interest payments on Brazil's debt.
Comments
Comments are closed.