Brazil Balks at IMF Pressure to Cut Deficits

President Jose Sarney said Monday in a nationally televised address that his government will not allow the “dogmatic intransigence” of international financial agencies to “impose a recessionary situation” on Brazil’s economy.

Sarney said Brazil, the world’s largest debtor, would honor its obligations of more than $100 billion to foreign banks and credit agencies and would try to avert an impasse in current negotiations on debt refinancing with the International Monetary Fund.

He said Brazil, as a mature country with a major role in world trade, is not going to follow the urgings of Cuban President Fidel Castro, who is calling on Third World debtors to repudiate their obligations.

“The debt must not be made into an instrument for ideological warfare, or for a confrontation between the East and West,” Sarney said.

Critical of Agencies

But he was critical of “international agencies” that want Brazil to cut back on public deficits and eliminate consumer subsidies in pursuit of reduced inflation, which raised prices here 234% in the 12 months before Sarney took office in March.

Sarney said Brazil’s anti-inflation fight will be based on “cleaning up our public finances” while maintaining a level of economic growth of between 5% and 6% a year.

With price controls in effect since March, the monthly rate of inflation has dropped to an average of 8% from 12% in the past three months. But prices are rising again as the government increases gasoline and electricity prices by 15% this month.

The refinancing of about $45 billion of foreign debt falling due by 1991 is the central problem facing the 4-month-old Sarney government, which represents a return to democratic rule in Brazil after 20 years of military regimes.

The key to these negotiations is the International Monetary Fund, which suspended negotiations with the previous military government on a standby agreement over serious violations of targets for control of the money supply, public deficits and internal credit.

Sarney’s economic team has reduced the budget deficit expected this year by cutting down on state enterprise investment and limiting current spending, but there is still a prospect of major increases in the money supply and government borrowing totaling more than $5 billion.