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BRASÍLIA and SÃO PAULO – Amid growing investor mistrust regarding the Brazilian fiscal framework, the Minister of economy, Paulo guedes, he guaranteed that he will do “whatever is necessary” to reduce the debt and mentioned, among the menu of measures to achieve this objective, the possibility of “even selling some reserves”.
Gross government debt is expected to close the year at 96% of START, according to National Treasure, with a strong increase caused by expenses with the fight against COVID-19. The forecast is that the debt will continue to grow and exceed 100% of GDP in 2025, only then to stabilize and begin to fall.
At the same time, the Brazil today it has 355.5 billion dollars in international reserves. The government has already sold a small portion of this protection cushion against external shocks, but ended up rebuilding part of what was sold in the midst of the crisis caused by the pandemic. Reservations are managed by Central bank, chaired by Roberto Campos Neto.
“Our logic is very simple. The debt has to fall. And the way to do it is to sell assets, privatize, deleverage public banks, reduce internal debt and even sell a little reserves, “said Guedes at an event promoted by Bradesco.
According to the minister, a high volume of reserves was needed when the real was overvalued dollar and the interest rate was higher. This composition, Guedes emphasized, changed to a more depreciated exchange rate and a lower interest rate, eliminating the need for a more robust reserve buffer.
The minister acknowledged that the government did not do well in its promise to privatize, but made it clear that it will continue to insist on that front. “We will do whatever is necessary to reduce the debt,” he guaranteed.
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