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Brazil finance minister announces first moves to slash 2023 primary deficit

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BRASILIA, Jan 12 (Reuters) –

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Brazilian Finance Minister Fernando Haddad announced on Thursday a package of measures to increase revenue and cut spending to slash the wide hole in this year’s public accounts.

“We will pursue the goal of closing 2023 with a primary deficit between 0.5% and 1% of gross domestic product,” he said at a news conference.

The fiscal shortfall in this year’s budget is forecast at 2.1% of GDP, equal to 232 billion reais ($46 billion).

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Haddad presented a broad list of actions whose impact was estimated at 243 billion reais ($47 billion), which would lead the fiscal balance to a surplus. But he said revenue frustrations might occur, as well as unexpected expenses.

The measures include actions that new leftist President Luiz Inacio Lula da Silva has not yet approved.

That includes ending the tax waiver on fuels, a topic that will only be on the agenda after the new board of state-run oil giant Petrobras takes office. It could increase public coffers by 29 bln reais this year, Haddad said.

Among the measures are changes to rules about how companies can generate tax credits with the ICMS state tax, which is expected to increase federal revenues by 30 billion reais this year.

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Haddad also announced a tax debt renegotiation program, providing for discounted fines and interest on installments, which could boost government revenues by 50 billion reais in 2023.

His plan includes an upward revision in revenues that were already forecast, cuts in expenses in reviewed contracts and programs, and the non-execution of part of authorized spending.

The measures were expected by investors as a counterpoint to booming expenses this year.

Even before taking office on Jan 1, Lula secured congressional support for a 168 billion reais

spending package

that bypasses the constitutional spending cap to meet campaign promises.

Markets had resented the lack of greater commitment to fiscal balance amid Lula’s statements placing social responsibility in the first place to eradicate hunger and misery in Latin America’s largest economy. (Reporting by Marcela Ayres Editing by Chris Reese and Leslie Adler)

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