(Bloomberg) -- Brazil will freeze 15 billion reais ($2.7 billion) in spending from this year’s budget to comply with its fiscal target, providing some relief to investors who feared President Luiz Inacio Lula da Silva wouldn’t sign off on the measure.
Finance Minister Fernando Haddad announced the decision on Thursday after a meeting with Lula and Planning Minister Simone Tebet, among other cabinet members. It will ensure that this year’s primary deficit, which doesn’t take into account interest payments, will remain within the range of tolerance of 0.25% of gross domestic product set in the fiscal rule, Haddad told reporters after the meeting.
The government had initially sought to completely eliminate such deficit, but that would require freezing at least twice that amount, according to estimates from economists at Itau Unibanco SA and Banco Santander SA.
The freeze was due to be announced July 22, together with the release of a new budget report, but the government decided to move faster to dispel concerns about public spending that have caused local assets to sell off.
“We are bringing it forward to avoid speculation,” Haddad said.
Lula on Tuesday had cast doubt on his commitment to the fiscal target, saying in a TV interview that he is “not obligated to set a goal and stick to it” if he decides he “has more important things to do.”
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