September 18, 2019 / 1:21 PM / a month ago

Brazil to free up to 22 billion reais to ease budget strain: economy minister

FILE PHOTO: Brazil's Economy Minister Paulo Guedes is seen during a BTG Pactual event for its clients and investors in Sao Paulo, Brazil, August 8, 2019. REUTERS/Amanda Perobelli

BRASILIA (Reuters) - Brazil’s government will loosen its purse strings to ease a public sector squeeze caused by deep budget freezes earlier this year, with up to 22 billion reais ($5.4 billion) set to be freed up, Economy Minister Paulo Guedes said late on Tuesday.

The funds will come from better-than-expected tax revenue in July and August, dividends from public banks, and 2.66 billion reais from state-run oil giant Petrobras (PETR4.SA) resulting from the ‘Car Wash’ corruption scandal.

“We are starting to relax the (spending) contingencies now,” Guedes said at an event in Brasilia late on Tuesday. “There is 12, 13, 14 billion reais, and there will be some 8 billion more to come.”

This is slightly at the higher end of estimates of how much cash the government will find to relieve pressure on the public sector machine, which has had to contend with some 34 billion reais of spending freezes this year as the government has tried to balance its books and meet its fiscal targets.

Presidential chief of staff Onyx Lorenzoni told Reuters last week the total would be around 20 billion reais - 14 billion reais released this month and 6 billion next month. Two Economy Ministry sources said an initial 12 billion reais of discretionary spending will be unlocked this week.

The Economy Ministry is due to release its latest bimonthly income and spending review by Sept. 22.

Reporting by Marcela Ayres; Writing by Jamie McGeever; Editing by Bernadette Baum

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