• Government will have to shoot for minimum 0.5% primary surplus
  • Congress expected to vote on proposal later on Wednesday

Brazil’s congressional budget committee on Wednesday took to heart warnings from Fitch Ratings and approved a more ambitious fiscal target for 2016 than previously planned.

The committee as expected voted to reduce next year’s budget surplus target before interest payments to 0.5 percent of gross domestic product from 0.7 percent. But in a departure from the government’s proposal on Tuesday, it won’t allow President Dilma Rousseff’s administration to discount investments from that target, eliminating the possibility of not posting any surplus at all. Lawmakers are expected to vote on the proposal in a joint session of Congress later Wednesday.

The change of heart came just hours after Fitch Ratings stripped Brazil of its investment-grade status, saying lawmakers haven’t shown the will to shore up the budget amid a recession and political turmoil.

Finance Minister Joaquim Levy, who has spent the better part of 2015 advocating for more austerity, said on Wednesday that the rate cut was serious and showed concern that Brazil isn’t doing all that’s needed. He has frequently denied rumors this year he would quit due to government allies pushing for less ambitious fiscal targets.

"This agreement makes Levy and Nelson Barbosa happy," Paulo Pimenta, the government leader on the budget committee, said in reference to Budget and Planning Minister Barbosa. "Levy thinks that 0.5 percent is an important sign for the government."

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