Lawmakers had previously approved $65,000 to pay for meals for themselves, but cut funding for coronavirus patients and human rights agencies.
Guatemala's legislature has backed away from approving a business-friendly 2021 budget after demonstrators in the Central American nation torched the Congress building and demanded the resignation of President Alejandro Giammattei in weekend protests.
A lack of resources for battling the coronavirus pandemic as well as anger over the new spending plan has fueled widespread indignation against Giammattei's administration and Congress.
"In order to maintain the governability of the country and social peace, we have agreed to suspend the processing of the budget," said Congress president Allan Rodriguez.
The suspension would create "space for discussion of the country's governance," he said.
Guatemala's only state-run university, the University of San Carlos, had earlier called for a national strike on Monday.
Meanwhile, powerful farmers' union Codeca appeared to back away from an earlier call for its members to block roads around the country.
Congress, dominated by conservative pro-government parties, last week approved an almost $13 billion budget, the largest in the country's history.
With the suspension, lawmakers now have until November 30 to approve a new budget, otherwise the government will continue to operate under the existing budget of $10.4 billion.
Thousands of Guatemalans took part in a peaceful demonstration in the capital on Saturday, but hundreds broke away and partly burned the Congress building, setting fire to several offices after smashing windows to get inside.
Hundreds of people returned to the streets on Sunday to demand Giammattei's resignation.
🎥🛑Scenes from #Guatemala where thousands of anti-government protesters took to the streets, set fire to Congress and brought a guillotine to protest against austerity, corruption and to demand the resignation of right-wing President Giammattei.#BastaYa pic.twitter.com/VWlryaMiAi— ©halecos Amarillosᴳᴸᴼᴮᴬᴸ 🍀ʷAͤNͣOͬNͤYˡMͤOᵍUͥSͦⁿ (@ChalecosAmarill) November 23, 2020
Rodriguez accused the protesters of using the budget as a pretext to commit "terrorist acts" aimed at "breaking the constitutional order and gaining access to power."
Attorney General Consuelo Porras said he had launched an investigation of the attack on the Congress building, and the heavy handed police response, in which some 20 protesters were wounded, one of them losing an eye to a rubber bullet believed to have been fired by security forces.
Amnesty International described the repression as "extremely serious" and accused the Guatemalan authorities of violating "international standards of use of force," said the group's director for the Americas, Erika Guevara, in a statement.
The UN also called for the fundamental rights of freedom of expression and peaceful assembly to be respected, and said an impartial and independent investigation was needed to look into what had happened in the protests.
The UN called on "all actors to work together to address the challenges facing Guatemala through peaceful means," according to a statement.
Meanwhile, the group of 13 donor countries and organisations – including the United States, the United Nations, France, Germany and Britain – expressed concern over the crisis and called for dialogue to seek a solution.
'Feelings of the people'
Giammattei, 64, issued a statement on Sunday afternoon reproaching Saturday's violent demonstrations, saying he considered the protesters to be "minority groups that seek to force a true coup d'etat."
The protesters are angry that most of the budget has been allocated to infrastructure tied to big business, while more than half of Guatemala's 17 million residents live in poverty and half of all children under the age of five are malnourished.
Lawmakers approved $65,000 to pay for meals for themselves, but cut funding for coronavirus patients and human rights agencies.
"The government started work in an arbitrary way and the demonstrations on Saturday show the feelings of the people, who are already tired of how the country is being run," Edie Cux, country director of Transparency International, told AFP.
He described the budget as "the last straw."
Giammattei's vice president Guillermo Castillo, with whom he has repeatedly clashed, said Friday night he had asked the president to resign with him "for the good of the country."
Castillo asked the public prosecutor's office on Sunday to investigate the burning of the Congress building as well as police repression of the protests, in which dozens of people were injured in clashes.
A former prisons chief, Giammattei took office in January but his management of the health crisis has been criticised by Castillo, the opposition and social sectors.
All have denounced deficiencies in the hospital system as well as in taking care of groups affected by lockdowns aimed at slowing the spread of the novel coronavirus.
Congress approved $3.8 billion to fight the pandemic, but less than 15 percent of those funds have been invested.
Guatemala has recorded nearly 120,000 cases of the virus and more than 4,000 deaths.