Brazil's Senate Approves Government's New Fiscal Rules

• Brazil's Senate on Wednesday, June 21, approved fiscal rules proposed by President Luiz Inacio Lula da Silva's government, considered vital in preventing a surge in public debt.
• The project received 57 votes in favour and 17 votes against. Since the senators modified the text that Brazilian deputies approved, it will require another round of voting in the lower house.
• The bill is seen as essential in signalling a path toward sustainability of public accounts, particularly after Lula secured congressional approval for boosting social expenditures to assist the poorest people.
• Under the proposal, government expenditures would not be allowed to rise by more than 70% of any increase in revenue, with spending growth also limited to between 0.6% and 2.5% per year above inflation. If budget goals are not met, expenditure growth would be restricted to 50% of revenue increases.
• The proposal's progress in Congress has been praised by S&P, which last week upgraded Brazil's credit rating outlook to Positive.
• The approval of these new fiscal rules by Brazil's Senate, represents a significant step towards fiscal responsibility and sustainability. This move not only helps to prevent a potential increase in public debt but also ensures a balanced growth in government expenditures, thereby fostering economic stability. The positive reception from international credit rating agencies like S&P further underscores the potential benefits of these measures for Brazil's economic outlook.

(Source: Reuters)