Economic Information

PRESS RELEASE - January 29, 2016

Fiscal Policy
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I - Fiscal results

The consolidated public sector registered a primary deficit of R$71.7 billion in December. The Central Government, regional governments and state-owned companies posted respective deficits of R$60.9 billion, R$9.8 billion and R$974 million.

In the year, the cumulative primary result reached a deficit of R$111.2 billion (1.88% of GDP), compared with a deficit of R$32.5 billion (0.57% of GDP) in 2014.

Nominal interests appropriated on an accrual basis reached R$52.1 billion in December, against R$23.5 billion in November. This trajectory was consequent upon the unfavorable result with foreign exchange swap operations in the month, compared with a favorable result in the previous month, and the greater number of working days. Cumulative nominal interests in the year amounted to R$501.8 billion (8.46% of GDP), rising 2.99 p.p. of GDP compared to the previous year. The expansion of appropriated interests in the year reflected the more unfavorable result with foreign exchange swap operations as compared with the previous year, and the increase in the Selic rate and price indices, which are the indexing factors of a significant portion of the net indebtedness.

The nominal result, which includes the primary result and nominal interests appropriated on an accrual basis, posted a deficit of R$123.8 billion in December. In the year, the nominal deficit totaled R$613 billion (10.34% of GDP), compared to a deficit of R$343.9 billion (6.05% of GDP) in 2014.

The nominal deficit in December was financed through expansions in the securities debt, in the net bank debt and other internal sources of financing, including the monetary base, and in the net external financing, which reached respective values of R$61.6 billion, R$49.1 billion, R$13 billion and R$137 million.

II - Federal securities debt

The domestic federal securities debt, outside the Central Bank, evaluated by the portfolio position, totaled R$2,650.2 billion (44.7% of GDP) in December, expanding by R$74.9 billion compared to the previous month. This result reflected net redemptions of R$44.4 billion, an increase of R$0.3 billion due to exchange rate depreciation, and the incorporation of interests, R$30.2 billion.

Items worth highlighting were net issues of R$23 billion in LTN, R$15.2 billion in LFT, R$5.6 billion in NTN-B and R$2.8 billion in NTN-F; and net redemptions of R$1.2 billion in securitized credits.

The participation by indexing factors registered the following evolution in relation to November: the percentage of exchange-indexed securities remained stable at 0.5%; Selic-indexed securities rose from 17.3% to 17.7%, due to net issuances of LFT; fixed-rate securities rose from 30.2% to 30.7%, due to net issuances of LTN; and inflation-indexed securities remained stable at 25.6%. The participation of repo operations decreased from 26% to 25.2%, consequent upon net purchases of R$22.1 billion.

In December, the maturity structure of the securities debt on the market was as follows: R$507.3 billion, 19.1% of the total, maturing in 2016; R$318.7 billion, 12% of the total, maturing in 2017; and R$1,824.2 billion, 68.8% of the total, maturing as of January 2018.

At the end of December, the total net exposure in exchange swap operations reached R$426.8 billion. The result of these operations in the period (difference between the yield of the Interbank Deposit (DI) and the exchange variation plus coupon) was unfavorable to the Central Bank by R$7.8 billion, accumulating an unfavorable result of R$89.7 billion in the year.

III - Public sector net debt

The public sector net debt reached R$2,136.9 billion (36% of GDP) in December, rising 1.7 p.p. of GDP compared to the previous month. The primary deficit in the month and the nominal interests appropriated on an accrual basis were the main factors responsible for this increase.

In the year, the PSND/GDP ratio increased by 2.9 p.p., reflecting the incorporation of interests (+8.5 p.p.), the primary deficit (+1.9 p.p.), the impact of accumulated exchange devaluation of 47% in the period (-6.5 p.p.), the parity adjustment of the basket of currencies that compose the net external debt (+0.4 p.p.), the acknowledgment of debt (+0.1 p.p.) and the effect of nominal GDP growth (-1.4 p.p.).

The Gross Debt of the General Government (Federal Government, INSS, state and municipal governments) reached R$3,927.5 billion in December (66.2% of GDP), rising 1.1 p.p. of GDP compared to the previous month and 9 p.p. compared to December 2014.

IV - Disclosure of liabilities

The Brazilian Federal Court of Accounts (TCU), in accordance with Judgment no. 3,297/2015-TCU-Plenário, partially accepted the request for a review lodged by the Brazilian Central Bank, and in doing so cancelled out the decision contained in Judgment no. 825/2015-TCU-Plenário regarding the recalculation of fiscal statistics released by the Monetary Authority in 2013 and 2014, about the inclusion of liabilities from agricultural equalization operations; the recalculation of equalization rates for the Brazilian Investment Support Program (PSI) coordinated by the Brazilian Special Agency for Industrial Financing (Finame); and the recalculation of payments made through the FGTS system that is linked to the 'Minha Casa Minha Vida' Program and others.

At the same time, Judgment no. 3,297/2015-TCU-Plenário determined that the Central Bank should individually publish a specific framework showing the evolution of these liabilities from 2009 to 2015, listing the monthly impacts on the PSND stock as well as on the primary and nominal fiscal results. This Judgment also stipulated that the amounts of stocks referring to these debts be included in the fiscal statistics disclosed by the institution, according to the position of December 31, 2015.

In order to comply with these requirements set out by the TCU, Tables numbered 43 to 45 were included in this Fiscal Policy Press Release, in which the monthly evolution of stocks from these liabilities are individually shown, as well as the monthly impacts that such amounts would have had on the PSND stock and on the primary and nominal fiscal results, in accordance with item 9.4.2 from Judgment no. 3,297/2015. Similarly, the stock balances referring to December 31, 2015, which are also shown in the aforementioned Tables 43, 44 and 45, were incorporated into the PSND stock as from December, 2015, thus impacting the fiscal results calculated for the period.

Therefore, it is worth mentioning that fiscal statistics published by the Central Bank from now on will incorporate the fiscal effects from the events dealt with by Judgment no. 3,297/2015 on the basis of monthly records accounted for by the creditor entities (Banco do Brasil, Caixa Econômica Federal, Finame and FGTS), according to the accrual criterion. Up to November, 2015, the methodological standard adopted in the fiscal statistics published by the Brazilian Central Bank included the impacts of these obligations whenever payments were made by the National Treasury, on the basis of the reduction of cash availabilities (National Treasury Single Account).