MNI BRIEF: Brazil Announces BRL70B In Spending Cuts
MNI (BRASILIA) - Brazilian Finance Minister Fernando Haddad on Wednesday announced BRL 70 billion of spending cuts over the next two years, the kind of move some investors expected to head off the risk of higher inflation and interest rates due to other expansionary fiscal policies.
The government will also exempt income tax for individuals earning up to BRL 5,000 per month, an increase from the current limit of BRL 2,259.20. Haddad emphasized that measure will have no fiscal impact because the income tax rate will increase for those earning more than BRL 50,000 per month.
“These measures I mentioned will generate savings of R$70 billion over the next two years and reinforce this government's commitment to the country’s fiscal sustainability. To ensure the expected results, in the event of a primary deficit, the creation, expansion, or extension of tax benefits will be prohibited,” Haddad said in a televised announcement. (See MNI INTERVIEW: Brazil Risks Fiscal Dominance-Ex BCB Deputy)