Fiscal Responsibility Law

The Fiscal Responsibility Law (LRF) is a Brazilian legislation that establishes public finance norms aimed at the public sector, both at the federal, state and municipal levels. It was created with the aim of promoting transparency, fiscal balance and control of public spending, with a view to ensuring the sustainability of public accounts and responsibility in the management of resources. The LRF was instituted in 2000, during the government of President Fernando Henrique Cardoso, and brought a series of devices aimed at disciplining the financial and fiscal administration of federative entities. Among the main measures provided for in the law are the establishment of limits for personnel expenses, the setting of fiscal targets, the prohibition of carrying out credit operations without authorization, among others. One of the most important points of the LRF is the establishment of limits for personnel expenses. According to the legislation, federative entities cannot commit more than 60% of their net current revenue to personnel expenses, with 50% of this limit allocated to the Executive Branch and 10% to the other powers (Legislative and Judiciary). If these limits are exceeded, adjustment measures must be adopted, such as reducing commission positions and limiting hiring. In addition, the LRF also establishes the obligation to set fiscal targets, which must be established annually by the federative entities. These targets are intended to guide fiscal management, setting limits for expenditure growth and establishing primary result targets, which is the difference between government revenues and expenditures, excluding expenditures on interest on the public debt. The law also prohibits carrying out credit operations without authorization, that is, federal entities cannot contract loans or financing without proper legal authorization. This measure aims to avoid excessive government indebtedness, which can compromise the ability to pay debts and generate imbalances in public accounts. Another important point of the LRF is the obligation of transparency in the management of public resources. The law establishes that federal entities must disclose information about their finances in a clear and accessible way to the public, through transparency portals and other mechanisms. This measure aims to ensure social control over the management of public resources and curb corrupt practices and embezzlement. In short, the Fiscal Responsibility Law is an important piece of legislation that seeks to promote responsibility in the management of public resources, establishing standards of control and transparency. It is essential to ensure the sustainability of public accounts and the fiscal balance of federal entities, contributing to the country's economic and social development.