May 29, 2019 / 6:56 PM / a year ago

UPDATE 1-Brazil posts primary budget surplus narrows as pension deficit widens

(Adds details, context, comment)

By Jamie McGeever

BRASILIA, May 29 (Reuters) - Brazil’s central government reported a primary budget surplus of 6.54 billion reais ($1.64 billion) in April, the Treasury said on Wednesday, lower than expected and less than the same month last year due to a widening social security deficit.

The surplus before interest payments are taken into account narrowed from 8.68 billion reais in April last year, and was less than the median forecast in a Reuters poll of economists of 8.35 billion reais.

Rising social security payments contributed to an overall 0.5% rise in spending from April last year, and receipts fell 1.5%, “mainly ... due to the slow economic recovery,” Treasury said.

The social security shortfall in April was 13.61 billion reais, up 12% from the same month a year ago. That brought the social security deficit in the first four months of 2019 to 65.1 billion reais, up almost 6% from January-April last year.

“Robust pension reform and tight control of wages and salaries are needed to ensure there are no further cuts to public investment in the coming years,” Treasury said in a statement accompanying the figures.

The government is trying to push through Congress a drastic overhaul of the pension system which it hopes will get public finances back on track, generate over 1 trillion reais of savings over the next decade and revive the sputtering economy.

In its bimonthly expenditure and revenue report last month, the government said it would cover an additional 2.18 billion hole in the public accounts with cash from a reserve fund rather than make further spending freezes or cuts.

Treasury’s figures showed the central government’s accumulated primary deficit in the 12 months to April stood at 121.8 billion reais, equivalent to 1.71% of gross domestic product. The government’s 2019 target is for a deficit of 139 billion reais, or 1.92% of GDP.

Brazil’s total social security deficit in the 12 months to April, which includes private sector, civil service and military personnel, totaled 297 billion reais, on track to end the year around 314.6 billion reais, or 4.4 percent of gross domestic product, the Treasury said.

Non-discretionary spending, which includes social security, is on course to reach a record 1.31 trillion reais by the end of the year, Treasury said, which will force discretionary spending to be cut to a decade-low of 98 billion reais.

$1 = 3.9800 reais Reporting by Jamie McGeever Editing by Jonathan Oatis and David Gregorio

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