Even with a surplus in January, public debt rises to 75% of GDP, the highest level in a year and a half

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Buoyed by good revenue, public accounts recorded a surplus of R$102 billion in January this year. Even so, debt rose due to interest expenses and the issuance of bonds by the Treasury. Public accounts have a deficit of almost R$250 billion. Consolidated public sector accounts recorded a primary surplus of R$102.14 billion in January this year, equivalent to 11.48% of Gross Domestic Product (GDP), the Bank reported Central this Thursday (7). The result was favored by the record performance of federal revenue. Despite the mark, gross debt rose 0.7 percentage points in the period and reached 75% of GDP – the highest level since July 2022 (see below). The indicator, closely monitored by investors and risk rating agencies, indicates the amount of money the government borrows to cover the public account deficit. The primary surplus occurs when tax revenues exceed expenses, disregarding interest on public debt. Otherwise, there is a deficit. The result encompasses the federal government, states, municipalities and state-owned companies. In January 2023, public accounts had recorded a surplus of R$99 billion, or 12.13% of GDP. There was, therefore, a small worsening of the result in the same month this year in proportion to GDP – an indicator considered more appropriate by experts. See below the performance that led to the account surplus in January this year: federal government recorded a positive balance of R$81.28 billion; states and municipalities had a surplus balance of R$22.51 billion; state-owned companies presented a deficit of R$1.65 billion. 2024 fiscal target For 2024, the fiscal target, set by the Budget Guidelines Law (LDO), is a deficit of up to R$13.31 billion for the accounts of the consolidated public sector (government, states, municipalities and state-owned companies) . The goal is to eliminate the deficit for the federal government. However, there is a tolerance range of 0.25 percentage points provided for in the fiscal framework (the new public accounts rule). In other words, there may be a variation of up to R$28.75 billion, up or down, in relation to the objective. As a result, the public sector can present a negative result of up to R$42.07 billion without the target being formally missed. Analysts’ expectations Even with the good result of public accounts at the beginning of this year, analysts estimate that it will be difficult for the federal government to reach the target of closing the deficit in its accounts in 2024. The analysis is that, in a scenario of economic slowdown , the Treasury will have difficulties in promoting the strong increase in revenue expected to reach the amount proposed in this year’s budget. The projection for total revenues in 2024 is R$2.72 trillion, an increase of around R$350 billion compared to 2023 – when they totaled R$2.36 trillion. Such strong growth in total revenue from one year to the next, however, was recorded on a few occasions (2010 and 2021, years marked by strong economic expansion). The economic team approved a series of measures to increase revenue in 2023, with an impact in 2024. The objective of the measures is to increase revenue by R$168 billion this year. Among them, the MP for subsidies, the return of the casting vote in Carf, changes to the interest on equity regime, in addition to the taxation of offshores and exclusive funds. Economists’ projection is that the government’s account deficit will be around 0.8% of GDP in 2024 – around R$90 billion. Public debt The debt of the consolidated public sector registered an increase of 0.7 percentage points of GDP, going from 74.3% of GDP in December 2023 to 75% of GDP in January this year – the equivalent of R$8. 21 trillion. The current level is the highest since July 2022 – when it accounted for 75.2% of GDP. In other words, it is the highest level in a year and a half. The rebalancing of public accounts is considered important by the financial market to avoid a spike in Brazilian debt – an indicator that is closely monitored by risk rating agencies. According to the BC, the growth in debt at the beginning of this year is related to interest expenses and the issuance of bonds by the National Treasury in the financial market. Even with the fiscal framework, financial market analysts estimated, last week, according to research by the Central Bank, that Brazilian public debt should reach 87.5% of GDP in 2033. According to the National Treasury, its estimates indicate that , with the new rules for public accounts, the debt will stabilize below 80% of GDP by 2026 and will continue its downward trend in the following years.

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