Brazil's Bolsonaro could veto 2021 budget with key fiscal rule under threat, says treasury secretary

By Jamie McGeever

BRASILIA (Reuters) - Brazilian President Jair Bolsonaro could wholly or partially veto the 2021 budget approved by Congress as a way of preventing a key government fiscal rule from being broken, Treasury Secretary Bruno Funchal said on Tuesday.

In an online news conference, Funchal said spending estimates in the budget approved by Congress and now awaiting Bolsonaro's signature were too low. Actual expenditure will likely be higher, threatening the spending ceiling, widely considered the government's most important fiscal rule.

"One way might be a full veto and discuss the budget (again), or a partial veto and ... rethink mandatory expenses. So these options, but it is difficult for me to speak now because discussions are ongoing," Funchal said.

Senate President Rodrigo Pacheco also said on Tuesday that Congress is open to discussing possible corrections to the 2021 budget with the government.

The Treasury said on Tuesday that the cuts likely required to compensate for the more "realistic" level of spending this year would be large, abrupt and could "paralyze essential state activities."

The spending cap limits growth in public expenditure to the previous year's rate of inflation. Mandatory spending accounts for some 95% of Brazil's federal budget, leaving very little room for maneuver.

(Reporting by Jamie McGeever, Gabriel Ponte, Isabel Versiani and Maria Carolina Marcello; Editing by Leslie Adler and Jonathan Oatis)