BRASILIA (Reuters) - Brazil's Congress passed legislation on Tuesday that limits the president's ability to reduce pork-barrel spending passed by lawmakers, a setback for President Dilma Rousseff's efforts to fight a fiscal deficit.
The bill forces the government to get congressional approval before cutting spending items added to the national budget by lawmakers for projects in their districts, effectively obliging the executive to spend the money approved by Congress.
Rousseff opposed the proposal which could add an estimated 7 billion Brazilian reais (1.6 billion pounds) to government spending, but she backed an amendment that will increase public spending on health to 15 percent of net current revenue in four years.
Unlike the United States, where appropriation bills passed by Congress must be executed, Brazilian presidents have greater powers to veto or delay budget items approved by lawmakers.
Increased spending in an election year contributed to Brazil posting a public sector primary budget deficit of 32.5 billion reais last year, the first annual budget gap since the current data series started in 2001.
The 2014 deficit underscores the daunting uphill battle that Rousseff's new economic team faces to shore up public accounts and avoid a credit rating downgrade in the midst of an economic slowdown that will shrink tax revenues.
Rousseff started out her second term last month appointing Joaquim Levy, a fiscal conservative, to launch an austerity drive that includes spending cuts and higher taxes.
Plans to trim unemployment and pension benefits, however, have met with strong opposition from labour unions and lawmakers from parties within Rousseff's government coalition.
