Brazil’s central government reported a primary budget deficit of $2.43 billion in June, its lowest since 1997, according to National Treasury data released on Thursday. A surplus of $5 billion was registered in the same month last year.
In an attempt to pick up the contracting economy, the government last week reduced its primary surplus budget target for 2015 from 1.2 percent of gross domestic product (GDP) to 0.15 percent. The move came after a sharp decline in tax revenues.
After setting the new targets Brazil experienced a mass sell-off of assets and its currency, the real, hit a 12 year low against the US dollar.
The negative response led credit rating agency Standard & Poor’s to warn Brazil that it is heading towards a “junk” credit status.
Meanwhile, the central bank of Brazil on Wednesday raised benchmark interest rates to a nine -year high of 14.25 percent to restrain inflation.
"The Committee understands that maintaining the benchmark interest rate at that level, for a sufficiently prolonged period, is needed to ensure that inflation converges to the target by the end of 2016," said the the bank.