June 5, 2019
BRASILIA (Reuters) – Brazil’s lower house of Congress on Wednesday approved a constitutional amendment to increase lawmakers’ control over public spending, giving the government even less fiscal maneuvering room.
The amendment obliges the government to spend a share of the federal budget on projects earmarked by congressional caucuses, effectively raising the already high share of non-discretionary government expenditure.
Non-discretionary spending, which includes areas such as health, education and social security, is currently around 91% of the central government’s budget and will rise under the new rules, further limiting the government’s room for maneuver.
The Senate had previously approved a similar amendment, so where the legislation overlaps it will become law. The Senate will have to reconsider technical aspects of the legislation that differ from the text approved by the lower house.
While lawmakers cheered their stronger voice on how tax money is spent, the move tightened an already suffocating fiscal straight jacket for Economy Minister Paulo Guedes.
Brazil’s public finances are under severe strain and the government is trying to push through an ambitious overhaul of the social security system, which it hopes will save more than 1 trillion reais ($260 billion) over the next decade.
Non-discretionary spending is on course to reach a record 1.31 trillion reais by the end of the year, according to Treasury projections, which will force discretionary spending to be cut to a decade-low of 98 billion reais.
(Reporting by Maria Carolina Marcello; Writing by Jamie McGeever; Editing by Marguerita Choy)