BRASILIA (Reuters) – Brazil’s central government posted a better-than-expected primary budget surplus in January on the back of record tax revenues, Treasury data showed on Monday, although the outlook for the year is for a large deficit.
The central government, comprised of the Treasury, central bank and social security, reported a primary budget surplus of 78.3 billion reais ($15 billion) in January, above the median forecast of a 60.9 billion reais surplus in a Reuters poll.
This was the best nominal result for the month since 1997, boosted by higher revenues amid a surge in taxes on capital income, as the country’s benchmark Selic interest rate was aggressively hiked to control inflationary pressures, resulting in larger collection over fixed-income funds and bonds.
After pushing its benchmark rate from a record-low of 2% in March 2021, the central bank paused its tightening cycle in September, holding it at 13.75%.
Although the central government’s primary surplus reached 54.5 billion reais in 12 months, the primary deficit in this year’s budget, the first under President Luiz Inacio Lula da Silva, had been forecast at 231.6 billion reais after Congress approval for a multi-billion spending package to increase expenses and meet campaign promises.
Finance Minister Fernando Haddad released a fiscal package in January to more than halve the shortfall, but the measures are uncertain, including a possible tax increase on fuels that needs Lula’s approval.
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($1 = 5.2054 reais)
(Reporting by Marcela Ayres; Editing by Mark Porter and Aurora Ellis)