Brazil's federal government sent its 2027 budget bill to Congress on Monday (Aug. 31), and the proposal ties pay raises for federal civil servants to a fiscal trigger. As long as the government keeps running a primary deficit, spending on personnel cannot grow more than 0.6% a year above inflation, according to news outlet G1 and state news agency Agência Brasil.

The mechanism sits in Article 6 of Brazil's fiscal framework, the public accounts rule approved in 2023, the first year of President Luiz Inácio Lula da Silva's current term. That framework caps spending growth at 70% of revenue growth, or 2.5% a year above inflation. At the end of 2024, Congress tightened the rule: whenever the government posts a primary deficit, meaning revenue falls short of expenditure before debt interest, spending limits kick in the following year and can only be lifted once a primary surplus returns. Brazil ran a deficit in 2025 and projects a R$ 52 billion shortfall for 2026, so the cap is set to bind in 2027, the first year of the next presidential term after October's election.

A ceiling through 2030

Through 2030, while the deficit persists, personnel spending cannot grow beyond the framework's minimum allowance for expenditure growth (0.6% a year above inflation). The ceiling covers active employees, retirees and pensioners, but not court-ordered payments such as precatórios, the government debts confirmed by final judicial rulings, Agência Brasil reported. In practice, the rule blocks any raise above inflation in 2027. Finance Minister Dario Durigan acknowledged the effect in June:

"We have the new fiscal framework, we created an additional trigger. Next year we will not have a real gain for public servants, which is a gain [in terms of spending containment] in a first year of government," Durigan said.

The restriction follows salary agreements the Executive branch signed in 2024 with most of the federal workforce. Those deals set raises for 2025 and 2026 and restructured careers, covering 98.2% of federal employees. Management and Innovation Minister Esther Dweck said at the time the agreements would replace inflation over Lula's term and still deliver a real gain.

The budget bill now goes to committee review in Congress, where lawmakers can amend it. It must be approved before the fiscal year begins on Jan. 1, 2027.