|
Brazil unveils crisis plan
|
 |
October 27, 1998: 9:18 p.m. ET
Sweeping budget cuts, tax hikes are aimed at shoring up crisis-torn economy
|
NEW YORK (CNNfn) - Brazil on Tuesday unveiled a long-awaited austerity plan that the country's economic stewards and outside investors hope will offer an effective firewall between global recession and the world's eighth largest economy.
Speaking in a nationally televised address, Brazilian President Fernando Cardoso outlined a multi-year plan that includes pledges for sweeping budget cuts and unspecified tax hikes to help rein in the country's runaway deficit.
Brazil's gross domestic product grew at rate of 3.7 percent last year, but fell off slightly in the first quarter in the aftermath of an interest rake hike last October following the outbreak of the Asian crisis.
While GDP rose 1.4 percent in the second quarter, progress has ground to a halt as economic global turmoil has eroded confidence in Latin America's increasingly vulnerable markets.
Cardoso said he would pare an "unprecedented" 8.7 billion reals, or $7.3 billion, from Brazil's 1999 budget to eliminate a yawning budgetary shortfall that amounts to 8 percent of GDP.
"To go beyond that would mean a paralysis of the state's essential activities," Cardoso said. "At this time when Brazil is stoutly confronting a serious international financial crisis, we must be united and think of the country's highest interests."
In September, Brazil's central bank more than doubled one key interest rate to 49.75 percent in a bid to curtail capital flight from the country in the wake of Russia's ruble devaluation and debt default.
The fiscal plan announced Tuesday may pave the way for the disbursement of a $30 billion multilateral financial aid package, led by the International Monetary Fund. Creditors have pressed Brazil in recent weeks to move swiftly to shore up its flagging economy as a condition for any aid.
The planned $7.3 billion spending cuts will likely be followed by a larger amount in tax hikes, with further details expected Wednesday. The total 1999 savings package is anticipated to be around $20 billion in 1999.
|
|
|
|
|
 |
|
