BRASILIA: Brazil’s government plans to keep a cushion of at least one trillion reais (US$190bil or RM794.4bil) in cash next year to face local debt maturities as it braces for possible market turbulence in the run-up to presidential elections, according to Treasury Secretary Jeferson Bittencourt.

       The Treasury had a hard time in 2020, when investors concerned with President Jair Bolsonaro’s big spending plans to fight the pandemic had little appetite for anything other than short-term government bonds.

       Average debt maturities fell to 3.3 years last year, hitting a pandemic low of just 2.1 years in October – from 4.8 years in 2019.

       This year, the Treasury has been able to lengthen average debt maturities back to almost five years while keeping 1.23 trillion reais (RM954bil) in cash for debt management, according to the latest available data from August.

       “It was not easy to raise our liquidity cushion when there was still concern with the pandemic,” Bittencourt said in an interview.

       For years, the Treasury had kept enough cash to pay down the equivalent of six to nine months of upcoming debt maturities.

       As public spending and market volatility increased during the pandemic, it has sought to increase that cushion to cover 12 months of maturities.

       Currently, the cash at hand covers nearly 11 months of debt coming due.

       The Treasury has also started giving more transparency to its cash position.

       The cushion stood at about 806 billion reais (RM625bil) in January, when it began releasing the data.

       Crucial to boost that amount was a bill approved by congress this year allowing the Treasury to add to its coffers 165 billion reais (RM128bil) from unused funds that were supposed to finance government policies in areas such as telecommunications.

       Another 30 billion to 40 billion reais (RM23.3bil to RM31.03bil) from those funds will be absorbed by the Treasury by end-2022.

       Bittencourt is optimistic about Brazil’s fiscal outlook despite concerns about how the government intends to finance a new social programme that Bolsonaro wants to launch by year-end.

       In order to find budget space for the programme without breaching the country’s fiscal cap rule, the government needs congress to approve a bill that limits payments ordered by the courts after the state lost legal cases, known as precatorios. — Bloomberg