BRASILIA, Nov 11 (Reuters) – Brazil’s government will propose new mechanisms allowing deeper spending curbs than currently required under its fiscal rules, Planning Minister Bruno Moretti said on Wednesday, as part of a package that is expected to improve public finances by up to 60 billion reais ($10.8 billion) next year.
Speaking at a congressional hearing, Moretti said one of the measures would pave the way for the government to impose additional budget freezes if needed, limiting real spending growth to 2%, below the 2.5% cap set under the country’s current fiscal framework.
There is mounting investor concern over Brazil’s fiscal outlook, with markets demanding fresh measures from President Luiz Inacio Lula da Silva’s administration to curb spending and put public debt on a more sustainable path.
The leftist president’s surprising reelection on October 25 sent the Brazilian real lower, lifted long-term interest rates and weighed on equities.
Brazil’s gross public debt has climbed more than 10 percentage points to 82.9% of GDP under Lula’s current term.
The package is expected to have a fiscal impact of 50 billion to 60 billion reais next year, with larger savings in subsequent years, Moretti said, adding that the measures would provide more tools to curb spending and review tax expenditures.
Separately, the package includes a proposal to exclude extraordinary oil revenues from the calculation of net current revenue, a move that would effectively limit growth in mandatory health spending.
Under Brazil’s fiscal rules, minimum health spending is linked to a share of net current revenue.
Moretti also said the proposal would include measures to curb excessive public-sector pay.
The minister indicated the bill would be introduced in the Senate, suggesting it would be submitted by a lawmaker rather than the executive branch — government-sponsored legislation must be submitted first to the lower house.
Reuters reported on Tuesday, citing a source, that the fresh fiscal measures would be presented by a government-backed lawmaker.
(Reporting by Marcela Ayres; Editing by Paul Simao)
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