Brazil’s Finance Minister, Fernando Haddad, announced on Thursday a plan to freeze 15 billion reais ($2.70 billion) from the 2024 budget. This move comes as the government grapples with meeting its fiscal targets for the year, following market pressures to reduce spending after a recent decline in local asset values.

Of the total amount announced, 11.2 billion reais will be blocked to adhere to a fiscal framework rule that limits annual spending growth. Additionally, 3.8 billion reais will be frozen due to a lack of agreement with the Senate on alternatives to recently approved payroll tax benefits. Haddad mentioned that these funds could be unfrozen if a deal is reached to compensate for the revenue losses from these tax exemptions.

The decision to curb spending is a response to market concerns about the government’s ability to eliminate the primary deficit. Since the start of the year, the Brazilian real has depreciated by over 13% against the US dollar, and interest rate futures have risen due to increased risk premia.

Haddad’s announcement followed a meeting with President Luiz Inacio Lula da Silva and was made ahead of the government’s bimonthly revenue and expenditures report, scheduled for release on Monday. Haddad stated the early announcement was intended to prevent information leaks.

The government aims to eliminate the primary deficit, excluding interest payments, with a tolerance band of 0.25% of GDP, equating to approximately 29 billion reais. Haddad indicated that the upcoming revenue and expenditure report would show a primary deficit near the upper limit of the tolerance band but still within the fiscal target.