Brazil's Levy pitches budget cuts, tax hikes to end deficit

Brazil's Finance Minister, Joaquim Levy, has proposed a new round of spending cuts and tax increases that are designed to close the budget gap and protect the country from further credit downgrades.

The government will reduce 26 billion reais ($US6.8 billion) in expenditures from next year's budget, in large part by capping salaries of civil servants and trimming social programs, Levy said. Brazil also plans to raise 28 billion reais in revenue by boosting taxes, including a levy on financial transactions.

"We know this effort to cut spending will only take us so far, so as would happen in any country in the world in a moment of reduced economic activity and tax income, you have to seek out other resources," Levy told reporters. "We're trying to find that balance."

The government wants to post a budget surplus next year rather than a deficit as previously forecast. Standard & Poor's cited the 2016 gap as a key reason for cutting Brazil's sovereign-debt rating to junk last week.

The government plans to save 20.6 billion reais in spending by cutting back on programs that provide sanitation, public housing, technical training and national broadband. The annual wage increase for some civil servants will come into effect in August rather than January next year, saving 7 billion raise.

by: Carla Simoes and Anna Edgerton