Brazilian gov't suspends states' debts for rest of 2016

RIO DE JANEIRO - Brazil's interim President Michel Temer announced Monday that the federal government agreed to suspend payments of its states' debts with the federation until the end of 2016.

The measure aims at giving some relief to states which have overwhelming financial problems, such as Rio de Janeiro, which declared a state of calamity due to financial problems last Friday.

"What we are announcing today is an emergency situation. We are taking this emergency step and later we will consolidate a great federation reform in the country," said Temer.

The federal government also agreed to extend the deadline for payments of the states' debts for 20 years and renew five credit lines of the Brazilian Development Bank (BNDES) for 10 years.

With the measure, Brazil just refrained from receiving 50 billion reais (14.7 billion US dollars) from its states until 2018. Out of those, 20 billion reais (5.9 billion dollars) would be received until the end of this year.

The Brazilian government will start collecting its states' payments in January 2017. At first, the states will pay 5.55 percent of the regular installment, and the amounts will gradually increase by 5.55 percent until the middle of 2018, when states will restart their payments. In exchange, the state governments agree to cut costs in the same manner as the federal government.