Brazil inserts spending limits into tax-break bill amid rising debt worries

Brazil's finance and planning ministries have moved to embed new fiscal-control triggers in a bill that also approves offsetting tax breaks linked to higher oil prices. According to three sources, the changes are designed to produce about 10 billion reais in savings for the next fiscal year and to address investor concerns over the Lula administration's handling of a rapidly expanding public debt. If the government's revenue and spending report projects a primary deficit—currently estimated at 52 billion reais—the legislation would cap the expansion of mandatory spending programs, limiting them to a real-spending increase of 0.6% to 2.5% for the following year.

Additionally, oil revenue earmarked for the Social Fund would be excluded from the calculation of mandatory health expenditures, stopping automatic budget growth from oil windfalls. These triggers would remain active until the government posts an annual primary surplus. The package is being pushed through Congress alongside the tax-break measures the administration hopes to pass in the coming days.