BRASILIA, Oct 22 (Reuters) - Brazil's currency and stocks
extended losses on Friday following an exodus of senior Treasury
officials after the government announced plans to ramp up
spending ahead of next year's election.
The two most senior Treasury officials and their two
deputies submitted their resignations on Thursday "for personal
reasons," according to the Economy Ministry.
The benchmark Bovespa stock index fell more than 4%
and the real weakened more than 1% against the U.S. dollar on
Late on Thursday, the president's allies in Congress won a
victory in a lower house committee for their plan to raise a
constitutional spending limit and stagger the government's
court-ordered debts. That would make room for 84 billion reais
($14.7 billion) of extra spending next year, said the bill's
With his popularity declining and a Senate inquiry calling
for criminal charges over his handling of the pandemic,
far-right President Jair Bolsonaro has vowed to more than double
payouts from the country's main welfare program to a monthly 400
On Thursday, Bolsonaro also promised a one-off 400 reais to
some 750,000 truckers hit hard by the rising cost of diesel and
threatening stoppages like one that left some gas stations in
Minas Gerais state without fuel on Friday.
That proposal, which was not fully vetted by the economic
policy team, had the four Treasury officials heading for the
exits even before Congress moved to lift the spending cap,
according to a person familiar with the matter.
The four officials have not made further comments on their
reasons for resigning.
Economy Minister Paulo Guedes pulled out of a public forum
on Friday, according to the supermarket association organizing
the event, stoking market rumors about his future.
Two sources told Reuters around midday local time that the
minister has not asked to step down.
Fiscal risks have led several economists to forecast an even
more aggressive interest rate hike by the central bank next
week, after raising rates by a full percentage point last month
to fight inflation now in double digits.
Credit Suisse economists are now predicting an increase of
125 basis points, while UBS analysts forecast 150 basis points.
($1 = 5.6910 reais)
(Reporting by Marcela Ayres
Additional reporting by Gabriel Burin in Buenos Aires
Writing by Brad Haynes
Editing by Rosalba O'Brien)