Sunday, May 9, 2021

Moody’s: Excluding spending from the ceiling is negative for the country’s credit profile

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The rating agency Moody’s said on Thursday, 22, that the government’s decision to exclude additional expenses related to covid-19 from the spending cap mechanism was “negative” for Brazil’s credit profile.

“However, due to the moderate amount of additional spending, and the recent approval of a constitutional amendment to ensure that mandatory expenditures stay within the spending ceiling in the coming years, we expect the authorities to maintain their commitment to fiscal consolidation, in line with the our base scenario, “Samar Maziad, vice president of the agency, said in a note.

Currently, Moody’s assigns a “Ba2” rating for Brazil’s sovereign credit, below the so-called investment grade, with a stable outlook.

Also according to Maziad, in a scenario of creating “recurring exceptions” in order to accommodate spending above the spending ceiling, “the credibility of the instrument as a fiscal anchor will be questioned, with negative implications for the cost and dynamics of the debt of the instrument. Brazil”.

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