Brazil to pursue 2026 primary surplus target despite challenges, minister says

BRASILIA (Reuters) - Brazil's Finance Minister Fernando Haddad said on Monday that the government is sticking to next year's primary surplus target even though it will be a challenge, as it prepares to submit its 2026 fiscal goal proposal to Congress.

Achieving the primary surplus "will not be easy, but we will pursue it," Haddad told an event hosted by newspaper Valor when asked whether he would formalize the previously projected primary surplus target of 0.25% of gross domestic product (GDP).

He added that the plan had the approval of leftist President Luiz Inacio Lula da Silva.

By law, the government must submit its fiscal target proposal for the following year to Congress by April 15.

Last year, the process sparked intense market turmoil after the government softened its 2025 fiscal target, opting for a more gradual adjustment in the years ahead than initially planned when it approved a new fiscal framework in 2023.

The framework ties primary balance targets to a cap on spending growth.

Haddad said he believes there could be positive surprises surrounding inflation this year, noting that Brazil's currency is starting to settle at levels "more or less in line with our peers."

"I think it's still a little off," he added.

The Brazilian real has gained over 7% against the U.S. dollar year-to-date, partly recovering from a more than 20% plunge last year.

Haddad said that a bumper crop, currency dynamics and geopolitical factors could favor Brazil this year. In 2024, the U.S. Federal Reserve's delay in cutting interest rates had created a more challenging environment for Latin America's largest economy, he said.

(Reporting by Marcela Ayres; Editing by Gabriel Araujo and Susan Fenton)