Flavio Bolsonaro weighs debt-linked fiscal rule that could freeze real spending

Two separate fiscal-tightening efforts are emerging in Brazil as concerns over rising public debt grow. Flavio Bolsonaro’s presidential campaign is drafting a new fiscal framework that would replace Luiz Inacio Lula da Silva’s budget rules with spending caps that tighten as debt rises, including a proposal that could freeze real federal spending when gross government debt exceeds 80% of GDP. Separately, Brazil’s finance and planning ministries are seeking congressional approval for spending triggers that could save about 10 billion reais ($1.94 billion) next year by capping some spending growth when a primary deficit is projected. Brazil’s gross public debt stood at 81.9% of GDP in June, and the latest fiscal report projected a 52 billion reais primary deficit this year, putting pressure on policymakers to strengthen fiscal controls.

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