BRASÍLIA—Brazil abandoned its fiscal targets for this year and through 2020, after a bribery scandal crippled President Michel Temer’s ability to push economic reforms through Congress and left the public sector with a gaping budget hole.
Finance Minister Henrique Meirelles said Tuesday that lower-than-expected inflation and tax revenues forced the government to loosen its goal for the primary budget deficit, or the public-sector shortfall before debt payments, from 2017 through 2020.
That means Brazil’s government debt burden, already the heaviest of any major Latin American economy at 73.1% of gross domestic product, is set to continue rising fast in coming years.
“What happened was a substantial drop in revenue so far in 2017,” Mr. Meirelles said in a press conference. “In addition to that, we have projections for [corporate] losses at a higher level and, therefore, greater problems…in companies’ ability to pay taxes.”
Mr. Meirelles’ decision, which has been the subject of intense media coverage in recent days, amounts to a high-profile shortcoming in the government’s effort to pull the economy out of a two-year recession.
Policy makers had scrambled in recent weeks to shore up public finances in a bid to meet the deficit targets set last year. The Finance Ministry in July attempted to double certain taxes on gasoline and diesel fuel. Authorities last week admitted they were weighing the creation of a new income-tax bracket above the current top rate of 27.5%.
Such measures sparked an outcry from…