Brazil proposes zero primary budget deficit in 2024, conditions expenditures to new fiscal rules

BRASILIA (Reuters) – Brazil’s Planning Ministry announced on Friday a zero primary deficit target for 2024, but stated that 172 billion reais ($35.03 billion) in government spending depends on the approval of a proposed new fiscal framework.

In a statement about the 2024 budget bill sent to Congress, the ministry said the new fiscal rules “will enable the re-composition and execution of priority public policies for the country,” as well as government functioning.

The much-awaited framework, presented by the government of President Luiz Inacio Lula da Silva in late March, is expected to be sent to Congress next week.

It has alleviated concerns over uncontrolled growth of public debt under the administration, resulting in a boost in local markets and strengthening of the real currency against the U.S. dollar.

As it awaits congressional approval, the government has crafted a budget proposal that adheres to the still-effective spending cap, which has limited expenditure growth to the previous year’s inflation since 2017 but has been breached multiple times.

Lula’s new rules combine a more lenient expenditure cap with primary budget targets with flexible bands. In line with this approach, the budget bill has defined that the primary budget balance target may vary by 28.8 billion reais up or down next year.

($1 = 4.9096 reais)

(Reporting by Marcela Ayres; Editing by Leslie Adler and Aurora Ellis)