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Weekly Report - 16 June 2016 (WR-16-23)

BRAZIL: Meirelles unveils 20-year cap on spending plans

In an effort to restore investor confidence in the Brazilian government’s administration of the economy, Finance Minister Henrique Meirelles has outlined an ambitious proposal to cap government spending until 2036. With Brazil’s public debt to GDP ratio over 67% and rising, the government plans to freeze current spending in inflation-adjusted terms for the next 20 years. Any increase in government revenue as the economy recovers would go to tackling the budget deficit rather than public spending. While the proposal has been broadly welcomed by economic analysts, many warn that further tax rises or spending cuts will be necessary to tackle Brazil’s debt burden in the short term.

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