June 12, 2019 / 3:47 PM / 8 days ago

UPDATE 1-Brazil's Caixa eyes 20 bln reais repayment which government will use to cut public debt

(Adds detail, quotes)

By Mateus Maia

BRASILIA, June 12 (Reuters) - Brazil’s Caixa Economica Federal is returning 3 billion reais ($1.825 billion) to the Treasury, the first part of a drive across state-owned banks to return funds to the government which will be used to reduce the public debt, Caixa’s president and the Economy Minister said on Wednesday.

In a hastily arranged joint-press conference, Caixa chief Pedro Guimaraes said the bank aims to return 20 billion reais to the government this year, and Paulo Guedes said other banks are working toward repaying previous loans made by the Treasury.

Guedes said state-owned banks like Caixa and development bank BNDES had committed “excesses” in the past, which had helped inflate the public debt. It was the government’s responsibility, together with the banks, to address that.

“It is important to be clear that this money is not for the Economy Ministry to throw around. Not at all. “This money is to help fix the public debt,” Economy Minister Guedes said.

“What Caixa is doing not only helps central government, it also strengthens the bank,” he said, noting that its debt will be cut by 20 billion reais plus interest payments of 18% a year.

Government officials, economists and analysts agree that Brazil’s public finances are in urgent need of repair, without which the economy will continue to struggle. The gross national debt rose to a record 78.8% of gross domestic product in April, according to central bank figures.

The loans Caixa is paying back refer to “Hybrid Capital and Debt Instruments”, funds which the government injected into the bank over the last decade or so.

State-controlled banks’ debt to the federal government connected to these instruments totals 86 billion reais: Caixa 41 billion reais, BNDES 36 billion reais, Banco do Brasil 8.1 billion reais, and Banco do Nordeste do Brasil and Banco da Amazonia each owe 1 billion reais. (Reporting by Mateus Maia Writing by Jamie McGeever Editing by Susan Thomas)

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