Brazil's Temer warns debt to swell to size of GDP if spending not curbed

Record ID: 78037

  • Title: Brazil's Temer warns debt to swell to size of GDP if spending not curbed
  • Date: 21st November 2016
  • Summary: MACAE, RIO DE JANEIRO STATE, BRAZIL (FILE - 2015) (REUTERS) CLOSED APPLIANCE STORE VARIOUS OF CLOSED FACTORY
  • Embargoed: 6th December 2016 15:20
  • Keywords: Michel Temer public sector debt gross domestic product
  • Location: BRASILIA AND MACAE, RIO DE JANEIRO STATE AND RIO DE JANEIRO, BRAZIL
  • City: BRASILIA AND MACAE, RIO DE JANEIRO STATE AND RIO DE JANEIRO, BRAZIL
  • Country: Brazil
  • Topics: Government/Politics
  • Reuters ID: LVA00459E1T8J
  • Aspect Ratio: 16:9
  • Story Text: Brazilian President Michel Temer warned on Monday (November 21) that the public sector debt will swell to the size of the country's gross domestic product by 2024 if public spending is not brought under control and fiscal reforms not enacted.
    Speaking to an advisory council of business leaders and prominent Brazilians, Temer said his government will send a proposal to Congress next month to reform Brazil's costly pension system.
    He said the pension overhaul was central to his plan to put government finances on a sounder footing.
    "The recovery of the economy and the generation of jobs are the number one priority of our people," Temer said.
    A federal spending cap should pass Congress without changes in a few weeks, he added. The measure has cleared the lower house and is expected to win approval by the Senate by Dec. 13.
    "Brazil's crisis is fiscal. For too long, governments have spent more than they earned," said Temer, who replaced leftist Dilma Rousseff who was impeached and ousted earlier this year from breaking budget laws.
    Temer called on the council to back his efforts to pass controversial belt-tightening measures that are needed to restore confidence in Brazil's finances and kick-start an economy stuck in its worst recession since the 1930s.
    "This fiscal adjustment will only be complete or semi complete with the reform of the providence whose first proposal we are finalizing and we will deliver to the national Congress next month," Temer added.
    The budget deficit is expected to close 2016 at around 10 percent of GDP for a second year.
    The public sector debt currently stands at 70.7 percent of GDP.
    It is expected to balloon to about 80 percent of GDP in coming years and could exceed an unsustainable 100 percent if spending is not curbed, Finance Minister Henrique Meirelles told the council.
    Temer said pension reform is an issue that is already causing "anxieties" and is expected to face fierce opposition from leftist parties and labor unions when it is debated in Congress next year.
    "If we had continued at the rate we were going, in the year 2024, we would have had to close Brazil's doors for a balance because the debt we would have had would be equivalent with the GDP (gross domestic product)," Temer added.
    The so-called Economic and Social Development Council convened to advise Temer on policies for Brazil includes leading businessmen.
    Among them are beer baron Jorge Paulo Lemann, the country's richest person; steelmaker Jorge Gerdau and Roberto Setubal, chief executive of Itau Unibanco, the nation's largest lender by market value.
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