UPDATE 1-Brazil Congress gives Rousseff nod to run hefty 2015 deficit

miércoles 2 de diciembre de 2015 17:02 GYT

(Rewrites throughout with details on fiscal policy, political context)

By Anthony Boadle

BRASILIA Dec 2 (Reuters) - President Dilma Rousseff's cash-strapped government won approval from Congress on Wednesday to drop its fiscal savings target and run a hefty deficit this year, a crucial vote that will allow it to pay its bills in December.

A severe recession has reduced tax revenues and plunged Brazil into a fiscal crisis that has shaken investors' confidence in the once-booming economy and fueled political disputes over belt-tightening measures.

Congressional approval to change the target from a 1.1 percent primary surplus originally planned to a deficit of up to 2 percent of gross domestic product will allow Rousseff to avert a government shutdown by unfreezing billions of reais in spending.

On Friday, Rousseff's administration was forced to freeze 10.7 billion reais ($2.78 billion) in spending to comply with Brazil's fiscal responsibility law after Congress delayed passage of the bill. The law obliges the government to cut spending to meet the fiscal savings goal.

The government warned Congress on Monday that it could not pay rent, water and electricity bills of its ministries in Brasilia until the bill was approved.

Lawmakers agreed to ease the consolidated primary fiscal deficit goal to a shortfall of up to 117 billion reais in case the government decides to pay massive debts with state-run banks. The primary fiscal balance, or savings prior to debt servicing, is an important gauge of a country's capacity to repay its debt.

In the last few years, Rousseff has delayed payments to state banks, amassing a huge debt that the opposition says was an impeachable violation of Brazil's fiscal responsibility law.   Continuación...