Brazil’s Central Government Posts Lower-than-expected Primary Budget Surplus In January

Brazil’s central government started the year with a smaller-than-expected primary surplus as spending outpaced revenue growth, Treasury data showed on Wednesday.

The government posted a primary surplus of 86.9 billion reais ($16.87 billion) in January, below the 88.8 billion reais forecast in a Reuters poll.

Expenditures rose 2.9% from a year earlier, while net revenue increased 1.2%, highlighting leftist President Luiz Inacio Lula da Silva’s challenge in balancing public accounts largely through revenue-raising measures.

On Tuesday, the tax authority said January collections hit a record for the month, though still insufficient to offset the rise in spending.

The Treasury attributed higher outlays mainly to increased social security payments, reflecting both a larger number of beneficiaries and higher benefit levels following the minimum wage hike.

It also cited higher personnel and social security charges, as last January’s figures had not yet reflected public sector wage increases granted from May.

In the 12 months to January, Brazil’s central government primary deficit reached 0.47% of gross domestic product (GDP), compared with a 0.25% primary surplus target for the year.