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Brazilian President Dilma Rousseff has assured investors her government will meet fiscal goals this year as Latin America’s top economy races to lower some of the world’s highest interest rates and boost economic activity.Reuters/Reuters

Brazil posted a record primary budget surplus in January, the latest evidence President Dilma Rousseff's push for fiscal restraint is helping pave the way for lower interest rates.

Brazil posted a consolidated primary budget surplus of 26.016 billion reals ($15-billion) in January, the largest amount for the month since the central bank began tracking the data in its current form in 2001.

In the 12 months through January, the primary surplus – which excludes debt servicing costs – was equivalent to 3.3 per cent of gross domestic product, up from 3.11 per cent in December.

Ms. Rousseff has assured investors her government will meet fiscal goals this year as Latin America's top economy races to lower some of the world's highest interest rates and boost economic activity. She succeeded in putting fiscal accounts back in order in 2011 after two years of heavy spending by her predecessor and mentor, Luiz Inacio Lula da Silva.

"These are stronger numbers than expected and mark a very good start of the year for the government," said Roberto Padovani, chief economist with Banco Votorantim in Sao Paulo.

"This strengthens the government position that they will achieve the [fiscal]goal this year."

Brazil plans to freeze 55-billion reals in spending from this year's budget, a move that many economists say will help the government hit its primary budget surplus target of 139-billion reals.

The country also posted an overall budget surplus, which takes into account interest payments, of 6.355-billion reals – the first surplus since September, 2010. In December, the overall budget balance was a deficit of 18.64-billion reals.

As a percentage of GDP, the overall deficit in the 12 months through January declined to 2.41 per cent from 2.61 per cent in December.

Those positive fiscal results are crucial to central bank chief Alexandre Tombini's efforts to continue slashing interest rates while keeping inflation under control.

Mr. Tombini said Brazil's main lending rate, the Selic, is likely to reach single digits, signalling the bank could opt for another rate cut when its monetary policy board meets on March 7. Since August, the bank has trimmed two percentage points from the Selic to 10.50 per cent.

Brazil's debt-to-GDP ratio edged up to 37.2 per cent in January from 36.5 per cent in December, the central bank said.

The primary budget surplus is a gauge closely watched by investors because it measures a country's ability to service its debt. It represents the excess of revenue over expenditures before interest payments are taken into account.

The fiscal data released on Wednesday encompasses the public sector, including federal, state and local governments as well as some government-owned companies.



Reuters

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