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Wednesday August 28, 2013 MYT 8:50:02 AM
Wednesday August 28, 2013 MYT 8:51:13 AM
by jeferson ribeiro
Brazil's President Dilma Rousseff (C) participates in a solemn session for the final report of the Parliamentary Inquiry Committee on Violence against Women presentation, at the National Congress in Brasilia August 27, 2013. REUTERS/Ueslei Marcelino
BRASILIA (Reuters) - Brazil's lower chamber of Congress passed a constitutional amendment on Tuesday that would force the federal government to get congressional approval before cutting or freezing spending items added to the budget by lawmakers.
The so-called obligatory budget amendment would reduce the government's flexibility to slash spending as it struggles to meet its fiscal savings targets amid an economic slowdown that has reduced federal revenues.
It will add to growing worries about the fiscal credibility of President Dilma Rousseff's government as she enters an election year when she is expected to seek a second term.
The pork-barrel spending items are important bargaining chips for the government to win support for its legislative agenda and hold together an unwieldy coalition of 17 parties, whose backing Rousseff needs for re-election.
The amendment still requires approval by two thirds of the Senate before being sent to Rousseff. Her government is negotiating with lawmakers to earmark for health programs half of the spending proposals made by individual lawmakers.
Currently, each lawmaker is allowed to propose individual spending items totalling a maximum of 15 million reais. The amendment would raise that to a limit of 1 per cent of the government's net revenues for the previous year, which could add more than 6 billion reais ($2.50 billion) to its spending.
In previous years, the government has frozen part of that pork-barrel money to meet its annual primary surplus goal, which is seen by investors as a key measurement of the country's capacity to repay debt.
Aggressive public spending this year to revive Brazil's struggling economy has jeopardized the surplus target, raising fears about the country's debt sustainability and leading a major rating agency to threaten a downgrade.
Rousseff's administration has already announced it will freeze 10 billion reais in budgeted spending, but analysts say that will not be enough for the government to meet its primary surplus goal this year.
($1 = 2.4 reais)
(Writing by Anthony Boadle; editing by Christopher Wilson)
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