Brazil · Economy

The number in the budget annex is 89.7 percent. The number the finance minister gave an interviewer the same day was 80 percent.

Brazil public debt is on a worse path than the government was forecasting five months ago, and the document saying so went to Congress on Friday. The fiscal risks annex to next year’s budget puts gross debt at 89.7 percent of GDP in 2030. In April the same exercise said 87.8 percent.

The budget bill and its fiscal risks annex go to Congress from the Esplanada each year.

What the Brazil public debt annex actually projects

The central scenario runs like this. Gross general government debt ends 2026 at 83.7 percent of GDP, reaches 89.6 percent in 2029, peaks at 89.7 percent in 2030 and then turns down. Round that to 90 percent if you like, but the government’s own central case does not quite get there.

Two other scenarios sit in the same annex. An optimistic one peaks at 88.4 percent in 2028. A lower-band scenario assumes the government keeps landing at the bottom of its tolerance range rather than the centre. That one crosses 90 percent in 2029 and peaks at 91.1 percent in 2031. An extreme stress case reaches 117 percent by 2036.

The more useful number is the revision. In April the projected peak was 87.8 percent. In June it was 87.9 percent. In September it is 89.7 percent, and a year later. That is nearly two points of deterioration in five months, and it is the part the market will read.

Two rulers, one country

If you have seen a figure near 100 percent for Brazil and wondered how it squares with 83 percent, both are right. The Brazilian central bank counts only those Treasury securities in the central bank’s portfolio that have been sold to the market under repurchase agreements. The International Monetary Fund counts the whole portfolio.

That gap is about fifteen points. On the Fund’s internationally comparable measure, Brazil was at 97.8 percent of GDP this year and is projected at 104.8 percent by 2030. The two measures converge on net debt, which stands at 69.13 percent.

So do not read the Fund and the finance ministry as rival forecasts of the same thing. They are different rulers. On the comparable measure Brazil is already close to 100 percent. The Fund still rates the risk of debt distress as moderate, citing cash buffers and very little foreign-currency debt.

The Senate’s own watchdog sees something much worse

The Independent Fiscal Institution, which reports to the Senate, uses the same central bank methodology as the government. Its numbers are therefore directly comparable, and they are far bleaker. Its June report has debt rising every year to 102 percent by 2032 and 115 percent by 2036, with no stabilisation anywhere in the horizon.

Its September report, published four days before the annex reached Congress, puts 2027 debt at 86.4 percent against the government’s materially lower path. It also sees a primary deficit of R$86.1 billion (about US$16.9 billion) in 2027 where the government projects a surplus of R$18.6 billion (about US$3.6 billion).

The single most useful figure in either document is this one. The institution calculates that stabilising the debt ratio would require a primary surplus of 2.1 percent of GDP every year. The official targets are 0.25 percent for 2026 and 0.5 percent for 2027. That gap, not the round number, is the fiscal story.

The minister and the annex do not agree

Friday 18 September was the day the annex went to Congress. That same day Finance Minister Dário Durigan told an interviewer Brazil would reach 2030 below 80 percent of GDP, or at worst at 80 percent. His own ministry’s document says 89.7 percent, which is a gap of roughly ten points.

There is a plausible innocent explanation. Net debt is 69.1 percent today, and a path to roughly 80 percent by 2030 is entirely credible. He may have been speaking about the net measure rather than the gross one. The interview as reported does not say which.

Durigan has been consistent on the diagnosis at least. In July he called debt stabilisation the last mile of the adjustment and said primary surpluses should arrive in 2028 and 2029. He attributed the recent rise mainly to high interest rates rather than to primary deficits. The watchdog replies that the causation runs both ways.

Why this reaches your pocket

The mechanism was quantified four days before the annex landed. The fiscal body decomposed the five-year term premium on Brazilian government bonds and found the debt position is a statistically significant driver of it. The fiscal component rose from 2.10 points in 2011 to 2013 to 3.16 points in the year to August 2026.

That is above the 2.41-point average during the fiscal crisis of 2014 to 2016. It concentrates at five and ten years, which means investors are pricing the trajectory rather than this year’s budget.

Two further numbers explain why it compounds. In the year to July, interest and net issuance added 10.5 points of GDP to the debt ratio while nominal growth subtracted only 5.2. The share of federal debt tied to the Selic rate also rose, from 35.7 percent at the end of 2023 to 46.4 percent in July. Almost half the debt now reprices with policy.

For a reader holding reais, the currency has actually had a good year, up about 6 percent against the dollar, helped by a 13.75 percent policy rate. For a reader holding Brazilian bonds, roughly 3.16 points of that yield is payment for the disagreement between the government and the Senate’s own analysts. That is the trade.

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