Fiscal Adjustment: Another Step, But Still Short of What’s Needed

BRAZIL ECONOMICS - Report 25 May 2015 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

In the attempt to meet the fiscal surplus commitment for 2015, the government has recently announced budget contingencies – in reality cuts – adding to R$ 69.9 billion. These will affect all discretionary spending categories, mainly investments, with cuts of R$ 25.7 billion in the Growth Acceleration Program (PAC), R$ 21.4 billion in legislative amendments, and R$ 6 billion in the My Home, My Life program (although R$ 27.7 billion was maintained). The government also announced an increase in the Social Contribution on Net Profit (CSLL) levy on banks, which will not bring in an appreciable sum (see the lower part of the table), but is a political response to loud criticisms that only the less favored classes have been penalized.

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