Brasilia, December 19 (teleSUR-RHC) Finance Minister Joaquim Levy was 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 Familia,” 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.

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