Brazilian Government Announces Billion Dollar Budget Cuts

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The Brazilian government announced on Friday it was cutting federal spending by R$23.4 billion (almost US$6 billion) in the 2016 budget as the country faces one of the largest recession in recent times. The cuts were announced by President Dilma Rousseff’s economic team, Finance Minister Nelson Barbosa and Planning Minister Valdir Simão.

The largest are to be seen in the Ministries of Mines and Energy, Education and Health, despite the current Zika virus scare. The Ministry of Mines and Energy will be the hardest hit, having to reduce its spending by almost fifty percent, from R$6.51 billion to R$3.37 billion. Brazil’s Health Ministry currently dealing with the national Zika virus health crisis will be forced to reduce its spending by R$2.5 billion, while the Education Ministry will reduce its budget by R$1.3 billion.

During the announcement Minister Simão stated that the federal government’s main investment program, PAC (Growth Acceleration Program) will suffer cuts of R$4.2 billion this year with the government rendering priority to projects already underway.

Government allies in congress applauded the reduction in spending stating that the administration was being transparent and realistic as to the current economic situation of the country. “The government signals to the market with this gesture its commitment to fiscal stability,” government leader at the Chamber of Deputies, José Guimaraes was quoted in Globo as saying.

For opposition leaders however, the measures announced on Friday were insufficient and will not avoid a new primary deficit this year. Agripino Maia, leader of the DEM party in the Upper House stated that the government had lost control of the economy, unable to push forth the needed reforms to make the necessary fiscal adjustments. “We are facing an inevitable catastrophe”, he noted.

The announcement comes days after rating agency Standard & Poor’s downgraded even further Brazil’s credit rating status, justifying the move with a forecast of ‘prolonged adjustment process with a slower correction in fiscal policy, as well as another year of steep economic contraction.’