Brazil Expects to Impose Greater Restrictions on 2020 Budget

Government estimates that non-compulsory expenses will have to fall below this year's


Brazil's 2020 Budget proposal will have greater resource constraints than in 2019. The government currently estimates that discretionary (non-compulsory) expenditures will have to fall below the threshold registered this year.

The government is still closing the numbers but point to a further limitation, even considering this year's contingencies. And with an aggravating. The problem of 2020 will comply with the spending ceiling rule, so there would be no relief even if extra revenues were obtained.

Brazil's Minister of Economy Paulo Guedes. (Foto: Pedro Ladeira/Folhapress) - Folhapress

This is because the constitutional norm of the spending ceiling, created in 2016, states that the total spending of the Union cannot exceed a certain level, regardless of the volume of revenue.

The creation of the law aimed to block the growth of public debt. The basis for calculating the limit for each year was the 2016 expense, which is now adjusted annually for inflation. For 2019, the ceiling is $ 1.34 trillion. By June (latest available data), 47% of this amount had already been executed.

Since the implementation of the spending ceiling, the government has seen discretionary spending increasingly limited thanks to continued growth in mandatory spending (which includes mainly pensions, as well as health and education allocations).

Treasury calculations show that the discretionary will be at $ 95.4 billion at the end of 2019, which represents the lowest value of the historical series, started in 2009. The amount represents 7.2% of mandatory spending. 

Translated by Kiratiana Freelon

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