Brazil's lower house approved on Tuesday the main text of the new fiscal framework proposed by President Luiz Inacio Lula da Silva, deemed crucial in averting the escalation of public debt.

The bill garnered 379 votes in favor and 64 votes against.

Lawmakers had previously green-lighted the bill in May. However, due to subsequent amendments made by the Senate, the text returned to the lower house for a final round of voting.

The proposal entails a cap on government spending, which cannot surpass 70% of any revenue increase. Additionally, spending growth is restricted to a range of 0.6% to 2.5% per year above inflation.

The text further stipulates that if predetermined primary budget targets are not met, expenditure growth will be curtailed to 50% of revenue increases as a disciplinary measure.

In a setback for the government, lawmakers rejected a Senate amendment enabling the government to incorporate a yearly inflation estimate that would have extended its expenditure ceiling when drawing up the 2024 budget law, which is due to be presented to Congress by the end of the month.

Although less stringent than the constitutional cap, which has limited the growth of public spending to inflation since 2017, the new fiscal framework has already played a role in reducing future interest rates since its presentation by the government.

It has also received plaudits from rating agencies S&P and Fitch, and has been acknowledged by the independent central bank as a pivotal step in addressing fiscal concerns.

(Reporting by Maria Carolina Marcello; Editing by Sandra Maler and Chris Reese)