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Weekly Report - 11 February 2016 (WR-16-06)
BRAZIL: Government considers flexible fiscal target
With the realisation that the government will struggle, once again, to hit its target of a primary fiscal surplus of 0.5% of GDP this year, the finance ministry is mulling the idea of introducing a flexible fiscal target. The idea would be to adjust the target to the country’s economic growth cycle; to create a moveable band of spending, and revenues similar to the government’s current inflation target. Collapsing tax revenues in the midst of Brazil’s worst recession since 1901, combined with political deadlock in the federal congress, are seriously limiting the government’s capacity to balance the books. Any attempt to loosen Brazil’s fiscal responsibility law, however, is also likely to run into political opposition.
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