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OR Brazil faces the threat of insufficient cash to pay emergency aid to 60 million people in vulnerable situations due to the coronavirus crisis, with current stocks considered low by central bank, according to two sources and a document seen by Reuters.
At the request of the BC, Casa da Moeda, which is responsible for the production of the tickets, asked its employees on Monday to increase the production of physical money starting this month to face the payment of emergency aid, according to a letter. obtained by the reports
The state company says it will pay overtime as needed and says the problem is “urgent,” according to the document seen by Reuters.
The R $ 600 per month emergency aid program for those without regular employment contracts went through a launch that faced problems, with the formation of large queues in front of the agencies of the Federal Economic Fund, bringing risk of contagion in the middle of the coronavirus pandemic.
Some people who don’t have regular bank accounts even camped out at branch doors overnight.
The initial pitfalls in the program approved by Congress come amid growing criticism that the government of President Jair Bolsonaro has not taken drastic measures to stimulate an economy that, according to some forecasts, may be reduced to double digits this year.
About a third of the population of Brazil does not have banking services, a higher percentage than in the China and even in India according to the world Bank, forcing the country to rely heavily on physical money, even as credit cards and other forms of payment become more common elsewhere.
The government started paying an initial fee for the program in early April, but delayed the second installment, originally scheduled for late last month. A new schedule for the three-month program will be released soon.
One source said the shortage of banknotes caused the second installment to be delayed, while another said the payment had not yet occurred because the first installment was still being paid, which would cause more confusion for the agencies. This person, however, confirmed that there is a shortage of foreign exchange that worries the government.
Security stock
Economic Policy Secretary Adolfo Sachsida told Reuters there was a “technical problem with the payment sources” of the funds, but denied that there was any problem with the lack of currency.
“If, by chance, there is a lack of money, a lack of physical notes, we will find a way to correct that,” he said.
The Central Bank, which oversees the money supply, confirmed that it is in negotiations with Casa da Moeda to anticipate the reception of contracted production for the year, saying that there was already a 23% increase in the amount of currency in circulation in April . , an increase of 55.5 billion reais compared to the previous year, according to a statement sent to Reuters.
Individuals and companies are piling up some of these notes to build reserves, due to concerns about the crisis, and because, with much of the economy closed, there are fewer places to spend money on trade overall, the regulator said.
The BC also considered that a “considerable portion” of the amounts paid in kind in emergency aid has not yet returned to the system. In April alone, 35.8 billion reais was paid in total, including account deposits and in-kind releases, according to Treasury data.
“The consultation (with Casa da Moeda) aims to build security reserves and mitigate any consequences of the hoarding phenomenon that has been observed since the start of the pandemic,” said the BC.
The negotiations aim to increase Casa da Moeda’s weekly money production by 40%, according to the president of the union of officials of the organ Aluízio da Silva Junior, adding that the union has not yet decided on the issue, which should be analyzed. in assembly. next week
The central bank said it was not aware of the delays in aid payments. The Citizenship Ministry, responsible for the emergency funds, did not respond to a Reuters request for comment. Caixa Econômica Federal, the bank responsible for payments, also said it would not comment.
The number of people seeking emergency assistance surprised government officials, who expected to pay R $ 98 billion to 54 million Brazilians. However, recent official calculations have updated the figure to 124 billion reais and 60 million people, equivalent to the population of Italy.
Caixa Econômica estimates that around 30 million digital accounts will be opened by non-bankers as a result of the emergency payment, a legacy that can help financial inclusion after the pandemic.
