BRASILIA: An austerity deal between the Brazilian federal and state governments is a positive first step to rebalance public accounts, but its implementation will face challenges at the state level, Moody's Investors Service analyst Paco Debonnaire said on Wednesday.

President Michel Temer agreed on Tuesday to share 5 billion reais ($1.5 billion) in fines with cash-strapped states in exchange for them to adopt reforms to limit expenditures and support a federal pension overhaul.

Copyright Reuters, 2016