After two years of decline, Brazilian public debt rises to 74.3% of GDP in 2023

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The increase in public debt last year is related, among other factors, to the increase in the public account deficit and interest expenses. Consolidated public sector debt increased by 2.7 percentage points of GDP in 2023, reaching 74.3% of Gross Domestic Product (GDP), equivalent to R$8.07 trillion. The information was released this Wednesday (7) by the Central Bank. At the end of 2022, the public sector’s gross debt was 71.7% of GDP, or R$7.22 trillion. The ratio to GDP is considered by experts to be the most appropriate concept for measuring and comparing the debt of nations. This was the first increase in Brazilian debt since 2020, the year of the Covid-19 pandemic, when an extraordinary increase in expenses was recorded. The expansion, therefore, happened after two years of retreat. The increase in Brazilian public debt is related to the worsening of public accounts in 2023 – when a deficit of R$249 billion was recorded, or 2.29% of GDP, the third worst result in history. The increase is also related to interest expenses, which totaled R$718 billion in 2023, or 6.6% of GDP, against R$586 billion (5.82% of GDP). Public debt is an indicator closely monitored by risk rating agencies. The rebalancing of public accounts is considered important by the financial market to avoid a spike in Brazilian debt. Fiscal framework In 2023, the government approved the so-called “fiscal framework”, that is, new rules for public accounts replacing the spending cap. According to these rules: expenditure cannot grow by more than 70% of the increase in revenue; the increase in spending is limited, in real terms, to 2.5% per year; the framework seeks precisely to contain the growth of public debt in the future. The government also announced the objective of returning to having accounts in the black starting this year, considered bold by the financial market. Even with the fiscal framework, financial market analysts estimated, last week, that Brazilian public debt should reach 89% of GDP in 2032. According to the National Treasury, its estimates indicate that, with the new rules for public accounts, debt will stabilize below 80% of GDP by 2026 and will continue its downward trend in the following years. International comparison According to the concept used by the International Monetary Fund (IMF), Brazilian debt was highest at the end of 2023, totaling 84.5% of GDP. This is because the institution includes “free bonds in the Central Bank’s portfolio” as part of the Brazilian debt – not considered in the Brazilian BC’s accounting. These securities are used by the monetary authority in operations that absorb excess money in circulation in the economy, as a way of containing inflation. At 84.5% of GDP, Brazilian debt, according to IMF projections, was below that of countries considered developed, close to the European Union nations and surpassed the level of emerging countries and Latin America.

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