Rousseff Says Brazil Will Try to Get out of First Budget Deficit

After presenting Brazil's first ever budget deficit, President Dilma Rousseff promised Wednesday that her government will work hard to get back in the black.

"We are being straightforward. And we are showing, clearly, that there is a problem," she said at a news briefing.

Rousseff made her vow to get her nation's budget under control as Brazil's Central Bank kept its key interest rate at 14.25 percent Wednesday, breaking with a string of seven consecutive hikes aimed at holding back soaring inflation.

Brazil just last week acknowledged that its battered economy -- the world's seventh largest -- has slipped into recession, hard-hit by plummeting oil and commodity prices. Inflation also is high at 9.56 percent and unemployment has risen to 7.5 percent. 

Rousseff's government delivered the proposed budget to Congress Monday predicting a primary deficit amounting to 0.5 percent of GDP, or 30.5 billion reais ($8.4 billion).

This was the first time a Brazilian government has unveiled a plan that would mean government spending outstrips revenue.

A primary budget reflects the government's ability to manage savings and debt. The worry for Brazil now is that its debt load will lead to a loss of its investment-grade credit rating, which would be a serious blow to the economy.

"We want to meet the goal that we set," Rousseff told reporters. "So we are going to get that deficit down."

- Tough outlook - 

The 14.25 percent interest rate is already one of the highest in big economies.

Analysts believe the high interest rate will gradually bring down price rises, but that a new hike could be risky.

The real has lost more than a quarter of its value against the US dollar this year and there are fears for Brazil's investment grade credit rating after the government on Monday presented a 2016 budget that for the first time projects operating in the red.

Amid the tough economic climate, inflation also is high at 9.56 percent and unemployment has risen to 7.5 percent. 

In addition to the macroeconomic troubles, Brazil is being shaken by a political crisis with Rousseff facing calls for her impeachment.

Brazil saw boom years peaking with 7.5 percent economic growth in 2010. But Latin America's biggest country -- the host of next year's Summer Olympics -- has been brought down by plunging commodity prices and political crisis.

Rousseff's popularity, with the economy so weak and major corruption scandals swirling, has skidded to single digits.

The largest scandal, at the state oil giant Petrobras, has launched a flurry off investigations and prosecutions are getting in gear.

The alleged scheme skimmed billions of dollars from the state oil giant and sent the money to political parties, and people's private accounts.

Rousseff herself has not been accused, but she chaired the board at Petrobras between 2003 and 2010, when much of the alleged corruption was flourishing. 

Prosecutors estimate that $2.1 billion in bribes were paid as part of the scheme.

Her predecessor, Luiz Inacio Lula da Silva Lula is being investigated in an unrelated influence-peddling probe, but has not been charged.