September 20, 2019 / 7:53 PM / 8 months ago

UPDATE 1-Brazil govt loosens purse strings by 12.5 bln reais, hints at more

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By Marcela Ayres and Jamie McGeever

BRASILIA, Sept 20 (Reuters) - Brazil’s government will free up 12.5 billion reais ($3 billion) for discretionary spending, the Economy Ministry said in its latest bi-monthly spending and revenue report on Friday, as it seeks to ease the pressure on departmental budgets following deep spending freezes this year.

The funds, as Reuters reported on Thursday, will be unlocked thanks to higher-than-anticipated revenues and a reduction in non-interest expenditure, particularly on salaries and benefits.

Revenue will be 6.5 billion reais higher than originally forecast and “primary” expenditure will be 6 billion reais below earlier estimates, the report said.

Waldery Rodrigues, special secretary to the Economy Ministry, said the government could have loosened the purse strings by “billions” more, but opted instead for “caution and transparency”.

Rodrigues said the 12.5 billion reais total, around half of which will go to the education, defense and the economy ministries, does not include some 8.3 billion reais expected to be raised by oil sector auctions later this year.

He did not rule out loosening the purse strings again beyond the regular bi-monthly reports. Up until Friday, budget freezes this year had totaled 34 billion reais as the government battled to stay on track to meet its fiscal goals.

“We want to control compulsory expenditure, and by doing so we make room for discretionary spending,” Rodrigues told reporters in Brasilia. “We will not relax the spending ceiling by making exceptions for certain items such as investments.”

The spending ceiling caps growth in public expenditure at the previous year’s rate of inflation, the government’s primary deficit target this year is 139 billion reais, and its ‘golden rule’ bars debt issuance to cover current spending.

Meanwhile, the government is studying the viability of selling off swathes of its real estate portfolio which could raise 36 billion reais by 2022 and ultimately 100 billion reais, an Economy Ministry official told Reuters.

The funds would be used to pay down debt, heritage secretary Fernando Bispo said.

$1 = 4.17 reais Reporting by Marcela Ayres Writing by Jamie McGeever Editing by Alistair Bell

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