UPDATE 2-Brazil repays debt to state banks, ends 'backpedaling'

miércoles 30 de diciembre de 2015 15:20 GYT

(Recast with payment, adds Treasury official comments and context)

By Alonso Soto

BRASILIA Dec 30 (Reuters) - Brazil said on Wednesday it repaid its massive debts to state-run banks, in a step towards reining in swollen budget deficits that cost the country its investment grade rating and threaten the stability of President Dilma Rousseff's government.

Opposition parties have used the debts totaling about 57 billion reais ($14.43 billion) to request the impeachment of Rousseff, accusing her of breaking budget laws to boost her reelection campaign last year.

The repayment of those liabilities, amassed over the last three years in a practice known in Brazil as "backpedaling", aims to prevent contaminating the fiscal results in 2016 as the administration scrambles to shore up its accounts.

The accumulated debts symbolized a period of high public spending during Rousseff's first term that eroded public finances and investors' trust in Latin America's largest economy, which is now mired in its worst recession in 25 years.

The administration, which denies any wrongdoing, repaid most of the debt using resources from the Treasury account in December, officials said on Wednesday.

A remaining 1.5 billion reais will be paid via a bond sale on Thursday.

The debts were owed to state lenders Banco do Brasil, Caixa Economica Federal and state development bank BNDES as well as the state workers' pension fund, FGTS. The Treasury said it paid an additional 16.8 billion reais to state banks during 2015 for a series of credit and social programs.   Continuación...