Brazil blocks more spending, widens 2026 deficit view

BRASILIA, May 22 (Reuters) - ‌Brazil's government announced ​on ​Friday a fresh 22.1 billion reais ($4.40 billion) spending block to comply with an expenditure growth ‌cap in its fiscal framework, adding to a ⁠1.6 billion reais restraint unveiled two months ago.

In its bimonthly revenue ‌and expenditure report, the government ‌said the total 23.7 billion reais spending block was required due to rising mandatory expenditures, notably higher social ​benefits, pension and payroll costs, which have squeezed available room under the cap and forced restraints on ⁠other outlays.

Under Brazil's budget law, overall spending is capped at growth of up ​to 2.5% above inflation this year.

In the report, the Finance and Planning ministries also projected ​a primary budget deficit of 60.3 ‌billion reais this year, compared with a 59.8 billion reais shortfall estimated in March.

The ⁠projected primary deficit corresponds to 0.44% of gross domestic product (GDP), versus a full-year target of 0.25% of GDP primary surplus.

Under Brazil's ⁠budget rules, however, the government can exclude certain expenditures, most notably ​part of its large stock of court-ordered payments, when measuring compliance with the fiscal target.

After these adjustments, the government now expects to ‌post a primary surplus of 4.1 billion reais, up from a prior estimate of ‌3.5 billion reais, roughly flat in GDP terms and consistent ⁠with the goal, which ‌allows a tolerance ​band of 0.25% of GDP in either direction.

($1 = 5.0178 reais)

(Reporting by Marcela Ayres; Editing by Aurora ‌Ellis)

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