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Rousseff says Brazil will try to get out of first budget deficit

Update: September, 03/2015 - 11:50

BRASILIAAfter presenting Brazil's first ever budget deficit, President Dilma Rousseff promised on Wednesday that her government will work hard to get back in the black.

"We are being straightforward. And we are showing, clearly, that there is a problem," she said at a news briefing.

Rousseff made her vow to get her nation's budget under control as Brazil's Central Bank kept its key interest rate at 14.25 per cent on Wednesday, breaking with a string of seven consecutive hikes aimed at holding back soaring inflation.

Brazil just last week acknowledged that its battered economythe world's seventh largesthas slipped into recession, hard-hit by plummeting oil and commodity prices. Inflation also is high at 9.56 per cent and unemployment has risen to 7.5 per cent.

Rousseff's government delivered the proposed budget to Congress on Monday predicting a primary deficit amounting to 0.5 per cent of GDP, or 30.5 billion reais (US$8.4 billion).

This was the first time a Brazilian government has unveiled a plan that would mean government spending outstrips revenue.

A primary budget reflects the government's ability to manage savings and debt. The worry for Brazil now is that its debt load will lead to a loss of its investment-grade credit rating, which would be a serious blow to the economy.

"We want to meet the goal that we set," Rousseff told reporters.

"So we are going to get that deficit down."

Tough outlook

The 14.25 per cent interest rate is already one of the highest in big economies.

Analysts believe the high interest rate will gradually bring down price rises, but that a new hike could be risky.

The real has lost more than a quarter of its value against the US dollar this year and there are fears for Brazil's investment grade credit rating after the government on Monday presented a 2016 budget that for the first time projects operating in the red.

Amid the tough economic climate, inflation also is high at 9.56 per cent and unemployment has risen to 7.5 per cent. — AFP



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