Plan includes temporary cap on ministry budgets while awaiting congressional budget approval
01/08/2025
The Brazilian government is considering issuing a decree to impose stricter rules on public spending at the beginning of the year, as it awaits Congress’s approval of the Annual Budget Act (PLOA).
The proposed decree would limit ministries to spending no more than one-eighteenth (1/18) of their annual budgets during this period. Essential expenditures, such as pensions, retirement benefits, and public sector payrolls, would be exempt and allowed to proceed as normal.
People familiar with the matter said the measure was discussed on Monday evening by Finance Minister Fernando Haddad and Chief of Staff Rui Costa. Talks continued on Tuesday in a meeting at the Planalto Palace with President Lula and Planning and Budget Minister Simone Tebet.
The government sees the decree as a way to signal fiscal austerity, a member of the economic team told Valor. The Budget Guidelines Act (LDO) allows the government to spend one-twelfth of the 2025 PLOA per month while awaiting its approval. However, the source noted that : it would not be prudent” to follow this rule given uncertainties surrounding the budget.
Other measures are also under consideration to reassure financial markets of the government’s commitment to fiscal discipline. These additional steps, which do not require Congressional approval, aim to complement the fiscal package submitted to lawmakers at the end of last year, the person explained.
Among the complementary measures, the government is preparing decrees and orders to regulate the fiscal package approved by Congress. Officials estimate these regulations could secure savings of at least R$69 billion over two years, though they believe the potential savings could be higher, as the estimate is conservative. Economists within the government dismissed claims that Congress weakened the fiscal package.
A key regulation will focus on the Continuous Cash Benefit (BPC), a welfare program for low-income seniors over 65 and individuals with disabilities of any age. This expense has been growing at a rate exceeding 10% above inflation. Officials argue that the approved changes will be crucial in bringing this expenditure “back to normal levels.”
*By Jéssica Sant’Ana – Valor — Brasília
Source: Valor International