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Brazil announces record-high budget cut
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THE Brazilian government announced a 69.9-billion-real (US$22.6 billion) record-high curtailment in the federal budget Friday.
The figure surpasses the 44-billion-real (US$14.2-billion) curtailment announced last year.
Out of the total figures, 67 percent is concentrated in investments and resources allocated to parliamentary bills. The Cities Ministry's budget experienced a 54-percent cut, while the Health and Education Ministries' budgets were slashed 11 percent and 19 percent respectively.
With the curtailment, the government hopes to meet the primary surplus target set for this year, which was reduced from 1.2 percent to 1.1 percent of the GDP. Last year, the government did not manage to meet the 1.9 percent primary surplus target set for the year, but instead registered a primary deficit.
According to Planning and Budget Minister Nelson Barbosa, the curtailment is a "necessary first step" for Brazil to resume sustainable growth.
Yet, the effort seems not enough for Brazil to grow in the short term. Even with the massive curtailment, the government foresaw a negative GDP growth of 1.2 percent for 2015. In 2014, Brazil's GDP grew by 0.1 percent after facing a technical recession in the first half of the year.
The perspectives for the inflation rate are also bad: The government expects the inflation rate to reach 8.2 percent this year, thus surpassing the inflation target set for this year, which was 4.5 percent with a two-point tolerance.
The last time Brazil had an inflation rate higher than the target was in 2003.
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