Coronavirus

Economy Minister ponders creating public debt payment plan

Caixa CEO Pedro Guimarães, President Jair Bolsonaro, and Economy Ministry Paulo Guedes. Photo: Antonio Cruz/ABr
Caixa CEO Pedro Guimarães, President Jair Bolsonaro, and Economy Ministry Paulo Guedes. Photo: Antonio Cruz/ABr

Economy Minister Paulo Guedes is mulling over a plan that would create annual payment goals to lower Brazil’s mounting public debt caused by the Covid-19 pandemic. According to the Minister’s cabinet, the fiscal mechanism would trigger automatic payments once the public debt reaches a certain percentage of Brazil’s GDP.

With roughly BRL 400 billion (USD 74.59 billion) of emergency public spending during the pandemic, Mr. Guedes has been increasingly worried about balancing finances and showing international investors that the Brazilian government is still committed to fiscally responsible policies.

If implemented, this plan will be funded mainly with the sale of government assets such as foreign exchange reserves. It will establish annual goals for paying at least a percentage of the public debt to prevent the total debt from reaching a specific threshold of the GDP. The latest round of spending has already raised the public debt to roughly 92 percent of Brazil’s GDP, with the extension of the coronavirus emergency salary, among other costs, expected to push it over 100 percent of the country’s GDP by the end of 2020.

The Economy Ministry will consult with the House, Senate, and Federal Accounts Court in hopes of achieving broader support for the eventual proposal.

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