BRASILIA (Reuters) – A move by Brazil’s Congress this week grabbing for more control over the federal budget would have an annual fiscal impact of up to 4 billion reais ($1 billion), Treasury Secretary Mansueto Almeida estimated on Thursday.
The Tuesday vote by the lower house of Congress could add that much to the government’s non-discretionary spending, which is already near its limits and must be cut if Brazil’s public finances are to be brought back under control, Almeida said.
The impact is a drop in the ocean of total government non-discretionary spending, which totaled 1.248 trillion reais ($320 billion) in the 12 months to February, according to Treasury figures released on Thursday.
The increase would also be vastly outweighed by the savings generated from a proposed pension reform, Almeida said.
However, some investors took the vote as a troubling sign of weakness for the government, which has struggled out of the gate in building a coalition to pass a social security overhaul aimed at saving more than 1 trillion reais over the next decade.
“The persistent growth in non-discretionary expenditure means discretionary spending has gone back to levels last seen in March 2010, in real terms,” the Treasury said on Thursday.
Treasury reiterated that social security payments account for the lion’s share of non-discretionary spending, and raised its 2019 pension deficit forecast to 314 billion reais, from 309.4 billion reais previously.
President Jair Bolsonaro, Economy Minister Paulo Guedes and House Speaker Rodrigo Maia presented a united front on Thursday on pension reform, trying to move past days of finger pointing that had rattled markets.
($1 = 3.9012 reais)
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