Flavio Bolsonaro proposes public debt ceiling for Brazil

Flavio Bolsonaro, a senator and primary challenger to President Luiz Inácio Lula da Silva in the upcoming October elections, has proposed the implementation of a public debt ceiling to bolster Brazil’s fiscal credibility.

Proposed by his economic advisor Adolfo Sachsida, the mechanism would trigger automatic spending cuts if the public debt exceeds 65% of the country’s GDP. This is a significant shift from the current debt level, which stands at approximately 82% of GDP.

The plan draws inspiration from a 2016 constitutional amendment under Michel Temer that limited federal spending growth to the previous year’s inflation rate. This stands in contrast to the current fiscal framework under the Lula administration, which allows for real spending increases between 0.6% and 2.5% annually while targeting primary surpluses.