Brazil’s National Debt Rises to Record High 79.8 Percent of GDP

RIO DE JANEIRO, BRAZIL – (Reuters) Brazil’s national debt rose to the highest on record in August, central bank figures showed on Monday, driven by a combination of increased interest payments, higher borrowing, and a weaker exchange rate.

Brazil’s total gross debt incorporating the central government, states, municipalities and the social security system rose to 79.8 percent of gross domestic product from 79.0 percent the month before, the central bank said.

That is the highest since comparable data records began in 2006 and highlights the challenge the government faces in restoring the public finances to health, which it says is a prerequisite for reviving confidence, investment, and growth.

According to the central bank, nominal interest rates added 0.5 percentage points to debt/GDP ratio, the real’s depreciation in the month accounted for 0.4 percentage points and net debt issuance added 0.1 percentage point. Stronger economic growth subtracted 0.3 percentage points.

The real weakened eight percent against the dollar in August, its biggest monthly fall in four years, and benchmark 10-year Brazilian bond yields posted their biggest monthly increase since August last year.

Brazil’s nominal budget deficit last month was R$63.64 billion (US$15.3 billion), bringing the accumulated deficit over the preceding 12 months to R$444.7 billion, or 6.32 percent of GDP, the central bank said.

The government’s primary fiscal deficit before interest rate payments are taken into account, was R$13.45 billion (US$3.2 billion), less than the R$16.69 billion deficit economists had expected.

For the 12 months to August, the primary deficit totaled R$95.508 billion, equivalent to 1.36 percent GDP. The government’s target for the calendar year is a deficit of R$132 billion, which would be the sixth consecutive annual shortfall.

Last week, the Treasury said spending freezes and cuts are putting the government on track to beat its fiscal targets for the year.

(Source: Reuters)