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    Brazil's Finance Minister Joaquim Levy arrives at the Finance Ministry in Brasilia, Brazil, December 18, 2015. | Photo: Reuters

Published 18 December 2015

Current Finance Minister Joaquim Levy will be replaced by Planning Minister Nelson Barbosa, a close ally of President Dilma Rousseff.

Finance Minister Joaquim Levy is being replaced following a series of disagreements over economic policy with President Rousseff, a senior government official told Reuters on Friday.

Levy, a former economist with the International Monetary Fund, has pushed forward austerity policies that have cut social programs such as “Bolsa Família,” the government’s flagship conditional cash transfer program.

Meanwhile, Barbosa, the current Planning Minister, has been one of the strongest opponents of the aggressive austerity drive. Levy had justified budget cuts as a way to curb the country's rapidly expanding fiscal deficit, which is close to 8 percent of GDP.

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Earlier this week, the Rousseff administration approved legislation altering the fiscal target to a range between 0 and 0.5 percent of the GDP. The National Congress had initially approved a 0.7 percent target for the 2016 budget.

The “fiscal target” refers to the government’s budget surplus prior to making any payments on its debt.

Increasing the flexibility of the fiscal target was supported by Barbosa, while Levy had argued decreasing the fiscal goal was “inconvenient.”

Friday’s announcement that Levy is being replaced comes after the international credit ratings agency Fitch downgraded Brazil's credit rating to “junk” status.

Economists warn that the Fitch rating may pose a threat to major infrastructure projects and future economic growth.

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