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Brazil's federal government reached a debt relief agreement with state governors on Tuesday, offering a discount on debt repayments in exchange for fiscal reforms, the Finance Ministry said in a statement. The government will send the agreed-upon terms, including a 40 percent discount on monthly payments for up to two years, to Congress by Monday, the governors of Santa Catarina and Goias states told journalists after meeting with Finance Minister Nelson Barbosa.
That measure would decrease states' debt payments by 7.1 billion reais ($1.88 billion) in 2016 and 7.5 billion reais in 2017, the Finance Ministry said. The discount would be limited to 160 million reais per month, or 1.92 billion reais per year, per state.
Barbosa told Reuters last week the discount for states would further lower the federal government's fiscal savings target for this year.
In exchange for the debt relief, states agreed to measures such as banning raises for public officials, passing the fiscal responsibility law and limiting credit operations for twice the amount of time for which they receive the discount.
The government last month said it would extend the maturity of the debt owed by states by 20 years, reducing their debt payments over the next three years.
Brazil's gross public debt has risen more than 15 percentage points to 66.2 percent of gross domestic product over the past three years, and many analysts expect the country's debt to climb to 80 percent of GDP in the coming years.

Copyright Reuters, 2016

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