Brazil is working on a plan to save around 80 billion reais ($28 billion) this year to meet a fiscal goal that is crucial to regaining investors' trust, a senior lawmaker and a government official said Tuesday.
The head of the Brazilian Senate, Renan Calheiros, told reporters that newly appointed Finance Minister Joaquim Levy asked allied lawmakers of the PMDB party to support the savings plan.
Levy told lawmakers Monday evening that he was working on such a plan but "will not make an adjustment of around 80 billion reais only with [budget] cuts,'' said a government official, who was present at the meeting and asked for anonymity to speak freely.
His comments suggested the government would most likely continue to raise taxes to reach its primary fiscal surplus goal of 66 billion reais, or the equivalent of 1.2 percent of Brazil's gross domestic product.
Achieving that fiscal goal is the biggest challenge newly re-elected President Dilma Rousseff faces to convince investors that she will leave behind years of heavy spending that cost the once-booming economy a debt rating downgrade last year.
Still, the package now under consideration would be smaller than the 100 billion reais in savings that some officials forecast earlier in the year. Brazil's economy risks falling back into recession amid fears of energy and water rationing and a widening corruption scandal at state-run oil giant Petrobras.
The finance ministry declined to confirm the size of the savings package or Levy's comment.
"The figure should be enough for the government to meet the target, but the real question is whether they can effectively save 80 billion reais,'' said Rafael Bistafa, an economist with Sao Paulo-based consultancy Rosenberg.
The government has so far announced measures such as fuel tax increases and spending limits that, taken together, would save about 40 billion reais. Some of those measures could be watered down in Congress, where lawmakers in Rousseff's own Workers Party have threatened to limit the extent of cuts to unemployment and pension benefits.
Calheiros, of the PMDB party, the largest in Congress, warned that the savings plan threatened to hurt the poor and that the government should start by cutting public wages and benefits.
Other people present at the meeting said Levy and other ministers signaled the government could announce more fiscal measures soon, without giving more details.