BRASILIA (Reuters) - The Brazilian government is preparing a provisional decree to reclaim payments inappropriately made to deceased pensioners and public servants, a measure that could help it save 1 billion reais ($302.93 million) this year, a government source told Reuters on Thursday.
That savings, combined with other measures to generate extraordinary revenues, should allow the government to revise its spending freeze later this month without jeopardizing its budget target, the source said.
The government currently takes about three months to stop paying salaries and benefits after a pensioner or employee dies. The decree, which could be published as soon as next week, would allow banks to send that money back to the government.
Authorities have been scrambling to meet this year’s budget target without resorting to tax hikes. Years of spending increases cost the country its investment-grade credit rating in 2015, and policymakers are trying to restore market confidence.
The government also has announced other budget measures, including a bill allowing the Treasury to appropriate resources from unredeemed judicial debts and a program to renegotiate tax debts, both of which could help generate 13.6 billion reais more in revenues than originally forecast.
The government must update its budget estimates for this year by July 22. Economists expect the extraordinary revenues to allow authorities to reduce this year’s spending freeze from 39 billion reais currently.
Piecemeal budget measures have become more important as a political crisis has made it harder for President Michel Temer to enact his top economic priority in Congress, his proposal to revamp the country’s pension system. The plan, which investors and many in government have called crucial to balance the budget in the long-run, could fail to pass before next year’s elections, legislators have said.
Economists expect a budget deficit of 142 billion reais for the central government this year, slightly larger than a target of 139 billion reais, according to a Finance Ministry survey.
The source reiterated that the goal will not be changed “by any means” and that tax increases could be implemented if necessary, despite weak economic growth. Finance Minister Henrique Meirelles said earlier on Thursday the government was still forecasting growth of 0.5 percent this year.
Among the tax hikes under consideration is an import tax increase on fuels, the source said.
($1 = 3.3011 Brazilian reais)
Reporting by Silvio Cascione and Marcela Ayres; Editing by David Gregorio and Bill Trott