By Marcela Ayres and Lisandra Paraguassu
BRASILIA (Reuters) – Brazil’s government is preparing spending curbs that would put health and education spending below an overall ceiling that already applies to other spending, two officials familiar with the matter said on Tuesday.
The measures, which have not yet been finalized, are aimed at easing fiscal concerns that have pushed Brazil’s currency to its weakest level since March 2021 in recent sessions, amid volatile trading ahead of the U.S. election.
The government sources, who requested anonymity to discuss ongoing talks, said the plan is to end the exemption for health and education spending from budget rules introduced last year under the government of President Luiz Inacio Lula da Silva accepted.
These new budget rules combine annual budget targets with an expenditure growth ceiling of up to 2.5% above inflation.
The Treasury Department declined to comment on the discussions.
Finance Minister Fernando Haddad said earlier that the government is working on measures to extend the life of the new fiscal framework, which could be announced this week.
Earlier on Tuesday, Lula’s chief of staff was expected to meet with the ministers of social security and social development to discuss new budget measures, his office said in a statement.
Currently, health care expenditures must be at least 15% of net current revenues, while education expenditures must be at least 18% of net tax revenues. As government revenues rise, these spending categories have eaten up an increasing share of the budget.
At meetings held this week to discuss budget measures, health and education ministers showed little resistance to the plan, a source said, noting that they are already spending less than their allocated budget.
The Ministry of Education did not immediately respond to requests for comment, while the Ministry of Health said it would try to respond when possible.
Under current spending dynamics, key mandatory expenditures, such as pensions and some social programs, have increased much faster than the overall expenditure ceiling, putting pressure on other expenditures and endangering the new fiscal framework.
