Levy bows to reality as Brazil economic slump drains savings

 Mario Sergio Lima, Arnaldo Galvao and David Biller – Bloomberg Business, 7/23/2015

Finance Minister Joaquim Levy’s proposal to reduce Brazil’s budget savings reflects the hard reality that a contracting economy has forced the government to scale back its ambitions for fiscal retrenchment.

Levy said he is targeting a fiscal surplus that excludes interest payments equal to 0.15 percent of gross domestic product this year, a sharp reduction from his original aim of 1.1 percent. He will freeze an additional 8.6 billion reais ($2.7 billion) in spending to meet the new target.

“The objective is to reduce uncertainty in the economy by announcing the target we consider achievable, adequate, certain, given the scenario we currently face,” the minister, nicknamed Scissorhands for his propensity to cut expenditures, told reporters.

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