Brazil's State Debt Rises as Interest Claims More

Brazil’s gross public debt held at 82.9% of GDP in September, the highest level since March 2021, while interest added nearly all of the month’s increase in federal debt. The central bank reported the debt ratio Thursday, 29 October; the Tesouro Nacional reported federal debt at R$9.383 trillion. The figures put the state’s borrowing costs at the center of the bill, with the public sector’s primary deficit far smaller than its nominal deficit, which includes interest.

The interest bill takes the lead

The central bank’s exact gross-debt reading was 82.93% of GDP in September, barely above August’s 82.87%. Net debt climbed from 69.3% of GDP to 70.0%, the highest in the central bank’s series, which began in December 2001. Gross debt counts federal, state and city governments; the Treasury’s separate figure covers federal bonds only.

The public sector recorded a primary deficit of R$5.5 billion, about US$1.0 billion, in September. Over 12 months, the nominal deficit, including interest costs, reached 9.51% of GDP, compared with a primary deficit of 0.52%. The report said interest accounted for almost the entire gap. That is the machinery behind the numbers: a comparatively small primary deficit alongside a much larger total once interest enters the ledger.

Brazil’s benchmark Selic rate stood at 13.75% a year. The real traded at about R$5.42 per U.S. dollar on Thursday, down roughly 1.3% on the day, according to market-data provider RT. Those figures place the public debt debate inside a financial system where interest rates and currency movements shape the state’s costs.

Federal debt grows as bonds come due

The Tesouro Nacional put federal public debt at R$9.383 trillion, about US$1.74 trillion, in September, up 0.97% from R$9.293 trillion in August. The increase was about US$17 billion, using an exchange rate of R$5.39 per U.S. dollar, RT’s closing rate on 29 October.

Interest added about R$89 billion, about US$16.5 billion, to the debt stock. That accounted for nearly all of the R$90 billion, about US$16.7 billion, increase; new bond sales and repayments roughly offset each other. Debt owed to domestic holders rose 1.04% to R$9.037 trillion, about US$1.68 trillion, while foreign debt fell 0.82% to R$345.41 billion, about US$64.1 billion.

More than half of the debt was tied to the Selic rate. That share fell to 51.6% in September from 52.74% in August. Bonds worth R$1.87 trillion, about US$347 billion, or 19.95% of the debt, were due within 12 months. The Treasury’s cash cushion rose to R$1.273 trillion, about US$236 billion, from R$1.208 trillion.

Projections, bets and choices

The Treasury’s annual financing plan projected federal debt of R$9.7 trillion to R$10.3 trillion, about US$1.80 trillion to US$1.91 trillion, at the end of 2026. Federal debt had grown R$747.9 billion, about US$139 billion, or 8.7%, so far that year. The central bank said the debt data did not indicate when the ratio would peak; that would depend on interest rates, growth and future budget choices.

Market bets on the central bank’s 4 November rate decision offered no public mandate: they were bets, not polls. One report gave 70.0% odds of no change and 27.5% of a quarter-point cut, with about US$118,000 traded as of 1:39 p.m. ET on 29 October. Another showed 73.5% for no change and 26.0% for a 0.25-point cut, with US$119,097 traded as of 5:15 p.m. ET. For December, that report showed 52.0% for no change and 23.5% for a cut, with US$50,113 traded. The central bank’s rate-setting committee is Copom. The debt figures leave the next move tied to financial conditions and future budget decisions, while interest already accounts for nearly the whole monthly rise in federal debt.