Brazil's public sector primary budget surplus soared in July from a year earlier, putting the country within striking distance of IMF-agreed goals as strong economic growth swelled tax revenues, central bank figures showed on Friday.
The primary budget surplus, which excludes debt payments, rose to 6.61 billion reais ($2.24 billion) in July, up from 4.32 billion reais in the same month a year earlier. The result was the highest on record for the month of July.
Latin America's largest economy must post a primary budget surplus equivalent to 4.25 percent of gross domestic product this year under a $40 billion loan deal with the International Monetary Fund.
The accumulated target for the first three quarters of the year is 56.9 billion reais and with July's result Brazil already notched up a surplus of 52.8 billion reais this year, up from 44.3 billion reais in the same period of 2003.
"What is missing is about two billion reais for both months until then," said Altamir Lopes, head of the central bank's economics department. "That is absolutely achievable."
July's result put the accumulated surplus in the 12 months to July at 4.65 percent of GDP, up from 4.54 percent in the year to June.
"When you compare that to the target (4.25 percent), the trend is improving," said Larry Krohn, a Latin American analyst at IDEAglobal. "I think we'll see that the economy will have grown quite well, which means more good tax collection."
Krohn said the July primary result was in line with expectations and confirmed the strong effort by President Luiz Inacio Lula da Silva's centre-left government to cut costs and ensure achievement of the IMF targets.
Figures due for release next week are expected to show that Brazil's economy is steaming ahead. A Reuters poll this week found economists expect second quarter gross domestic product to have grown 1.24 percent from the first quarter and 4.7 percent from the same period last year.
Full-year growth should reach 4.1 percent, which would be Brazil's biggest expansion since 4.4 percent in 2000, according to the poll.
Data released on Thursday also showed Brazil's unemployment rate fell for the third straight month in July, to a 2004 low of 11.2 percent, reinforcing the positive outlook for the economy.
However, while growth is picking up, the central bank put a slight damper on the outlook on Thursday, when it warned that inflation risks are rising. The comments were widely seen as an indicator that the bank's next rate move could be a tightening of monetary policy.
But Friday's fiscal figures brought good news on the debt front for the government. The country's total public sector debt fell to 55.3 percent of GDP in July from 56.0 percent in June thanks to higher growth and slight strengthening of the local currency, the real, against the dollar.
"The trend (of debt levels) should continue to be downward," said Krohn. "The currency has been favouring declines on the debt side, we don't see that reversing."
The Central Bank said it expected the debt-to-GDP level, a closely watched indicator of Brazil's fiscal health, to reach 55.2 percent in August.
The bank said the nominal budget deficit, which does include the cost of servicing the debt, reached 3.33 percent of GDP in the 12 months to July, compared with 3.79 percent in the 12 months to June.