BRASILIA, Oct 29 (Reuters) – Brazil’s interest bill rose to 8.99% of gross domestic product in the 12 months through September — a level not seen since January 2016, when the country was mired in a deep economic recession, central bank data showed on Thursday.
Meanwhile, the public sector’s primary deficit stood at 0.52% of GDP, pushing Latin America’s largest economy to a nominal fiscal deficit of 9.51% of GDP in the same period.
Brazil pays one of the world’s highest nominal interest bills as investors demand a hefty premium to finance a government whose debt burden has risen rapidly amid fiscal uncertainty and the continued expansion of mandatory spending.
That risk premium keeps borrowing costs elevated, while an increasing share of government debt is linked to the benchmark Selic rate, now at 13.75%, making public finances more sensitive to high interest rates.
As a result, even as the government narrows its primary deficit, interest costs remain large enough to drive continued growth in the debt stock.
In September alone, the public sector posted a primary deficit of 5.5 billion reais ($1.03 billion), compared with expectations for a 500 million reais surplus in a Reuters poll, while interest expenses were nearly 20 times higher at 107.5 billion reais.
Gross debt, the government’s main measure of solvency, was unchanged from August at 82.9% of GDP.
Since President Luiz Inacio Lula da Silva took office in 2023, gross debt has increased by 11.3 percentage points of GDP.
Lula secured reelection on Sunday for a new four-year term, and stabilizing the rapid growth of public debt is widely seen as one of the administration’s main fiscal challenges as he seeks to deliver on campaign pledges for additional public spending.
($1 = 5.3440 reais)
(Reporting by Marcela Ayres in Brasilia; Editing by Hugh Lawson)
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