A special measure meaning State Governments across Brazil do not have to repay debts until the end of the year has been passed in a boost ahead of the Rio 2016 Olympic Games.
The measure, announced by interim President Michel Temer, means that payments due to the Federal Government can be delayed.
They also agreed to extend the deadline for payments of the states' debts for 20 years.
Five credit lines of the Brazilian Development Bank has also been renewed for the next 10 years.
In return, State Governments have agreed to take cost-cutting measures wherever possible.
The measues are designed to help relief states dogged by financial problems, including Rio de Janeiro, where an an unprecedented “state of public calamity in financial administration” was declared by acting State Governor Francisco Dornelles last week.
"What we are announcing today is an emergency situation," said Temer.
"We are taking this emergency step and later we will consolidate a great federation reform in the country."
This is another indicator of the dire economic problems faced by Brazil with less than 50-day-to-go until the Olympic Opening Ceremony.
Domelles said that a lack of such support could prevent “the fulfilment of the obligations as a result of the Olympic and Paralympic Games Rio 2016”.
Temer has already vowed to prioritise any projects considered necessary for the Olympic Games.
Responsibility for Games-related projects is split between the Federal, State and Municipal Governments, as well as the Organising Committee and private investors.
The State Government have already been blamed for the failure to treat pollution levels on Guanabara Bay, while they are also responsible the completion of transport projects vital for the Games.
This includes the subway extension due to link the city centre with the main Olympic Park in Barra de Tijuca.
A payment of BRL$989 million (£193 million/$280 million/€246 million) to the state, considered vital for the completion of the line, was rejected earlier this month by the Brazilian National Development Bank due to a failure to pay-back previous loans.
Temer has promised last week the funds will be delivered by the start of this week, but there has been no confirmation yet that the money has been received.
Any further delays could be fatal considering the line is only scheduled to be opened on August 2, three days before the Opening Ceremony.