Brazil government proposes 20-year spending cap to tame public debt

Alonso Soto and Maria Carolina Marcello – Reuters, 06/15/2016

Brazil’s interim President Michel Temer proposed on Wednesday a constitutional amendment to limit public spending growth for up to 20 years, one of the most far-reaching fiscal reforms in decades designed to curb a runaway rise in public debt.

Brazil’s government, including the legislative and judiciary branches, will be obliged to limit annual spending growth to the inflation rate of the prior year if the flagship reform is approved in Congress, according to a Finance Ministry statement.

The move signaled a victory for economic hardliners in the cabinet, led by Finance Minister Henrique Meirelles, who overcame calls from a faction pushing for a shorter cap.

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