Brazil's Congress on Wednesday approved federal budget guidelines that set a much lower savings goal for next year, in line with President Dilma Rousseff's efforts to regain fiscal credibility with more attainable targets. The new 2015 guidelines, known as LDO, set the primary budget surplus goal at 66.3 billion reais ($24.2 billion), or the equivalent of 1.2 percent of gross domestic product.
Since Rousseff took office in 2011, the primary surplus, or excess revenues before debt payments, has shrunk from 3.1 percent of GDP to less than 2 percent and risks turning into a deficit this year for the first time in nearly two decades. Her incoming finance minister, Joaquim Levy, on Wednesday changed the 2015 budget guidelines to lower the primary surplus goals for the next three years based on market forecasts for growth and inflation.
Rousseff is trying to convince investors she will change policies to adopt more fiscal prudence and aggressively fight inflation to reverse a drop in business confidence, which has dragged down the once-booming economy. In the guidelines, the government expects economic growth of just 0.8 percent for 2015, well bellow its original forecast of a 3 percent expansion.
The erosion of Brazil's finances and accounting "tricks" the administration used to artificially beef up public accounts led Standard & Poor's to cut the country's debt rating closer to junk status in March. Lawmakers from both houses approved the guidelines in a joint session of Congress. Leaders of parties allied to the government have said they will push to pass the 2015 budget bill before its year-end recess, which starts on December 23.
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