Brazil govt to freeze $2.1 bln in expenditures to comply with fiscal rule

By Marcela Ayres

BRASILIA, May 20 (Reuters) - Brazil's Economy Ministry on Friday said it needs to freeze 10 billion reais ($2.1 billion) in expenditures to comply with the spending cap rule, which limits spending growth to the previous year's inflation.

The limitation highlights President Jair Bolsonaro's difficulties to approve new expenses that are not yet included in the budget while seeking reelection in October.

This is the case of a much-demanded wage increase for civil servants, at a time when several categories continue to paralyze services to press for salary adjustments amid double-digit inflation in Latin America's largest economy.

The need for a freeze jumped from the 1.7 billion reais budget block described as necessary in March, according to the Economy Ministry latest bi-monthly revenue and expenditure report.

According to the ministry, new blocking allows other crucial expenses to be made without breaching the spending cap, including 4.8 billion reais with lost court decisions and 2.3 billion reais in agricultural subsidies.

The ministry projected a 2022 primary budget deficit of 65.5 billion reais ($13.45 billion) for the central government, slightly better than the 66.9 billion reais deficit seen in March and against an official deficit target of 170.5 billion reais this year.

The projection for net revenues was increased by 36.3 billion reais compared to March, mainly due to booming tax revenue.

Expenses grew by 34.9 billion reais, primarily affected by higher discretionary spending from the executive branch. ($1 = 4.8625 reais) (Reporting by Marcela Ayres; Editing by Sandra Maler)