2 weeks ago
Brazil Congress Approves Spending Curbs as Debt Concerns Mount
Brazil is a big country whose government spends a lot of money and owes a lot of money.
The people who make laws in Brazil, called Congress, approved new rules to help the government spend less.
These rules slow down how fast the government's required payments, called mandatory spending, can grow.
That could save about 10 billion reais next year, which is about 1.94 billion US dollars.
The rules work like a speed limit: if the government predicts it will spend more than it earns, its new spending plans cannot grow too fast.
Brazil expects to spend 52 billion reais more than it earns this year, so the speed limit would start next year.
The rules stay in place until the government earns more than it spends for a whole year.
The new rules still need the President to sign them to become law.
President Lula is also running for reelection in October.
Brazil's Congress approved spending-control mechanisms proposed by the government to rein in rapidly rising public debt.
Finance Minister Dario Durigan said the changes should generate about 10 billion reais ($1.94 billion) in savings next year by slowing mandatory spending growth.
The rules would cap spending mandates created by ordinary legislation in the following fiscal year if a primary deficit is projected; the latest report projects a 52 billion reais deficit this year.
The government also proposed excluding oil revenue transferred to the Social Fund from the calculation of mandatory health spending.
The bill, approved by the lower house and the Senate, now heads to presidential sanction as President Lula seeks reelection in October.
- Who
- Brazil's lower house and Senate, acting on a proposal from President Luiz Inacio Lula da Silva's government, with Finance Minister Dario Durigan announcing the measures.
- What
- Approved spending-control mechanisms aimed at slowing mandatory spending growth and reining in the country's rapidly rising public debt.
- Where
- Brasilia, Brazil
- When
- Wednesday, August 12; the bill now heads to presidential sanction.
- Why
- To address rapidly rising public debt and investor concerns about the government's willingness to pursue a forceful fiscal adjustment.
Government view
Investor view
Size of fiscal adjustment
Government view
The government says the permanent measures will help control mandatory spending, generating about 10 billion reais in savings next year.
Investor view
Investors question whether the administration will pursue a more forceful fiscal adjustment as public debt rises rapidly, and note Lula's reelection platform does not explicitly address a more ambitious adjustment.
Key facts
- Expected savings next year
- About 10 billion reais ($1.94 billion)
- Projected primary deficit this year
- 52 billion reais
- Annual real spending growth limit
- 0.6% to 2.5% under the fiscal framework
- Status
- Approved by Congress; heading to presidential sanction
- Finance Minister
- Dario Durigan
- Location
- Brasilia, Brazil
- Reported exchange rate
- $1 = 5.1618 reais (approx.)
Quotes
Dario Durigan
Finance Minister of Brazil
“"We took the opportunity to introduce permanent measures that help us in controlling mandatory spending."”
theprint.in
Sources
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