Brazil’s gross general government debt (DBGG) is expected to reach 78.3% of GDP by the end of this year and 81.4% by the close of 2025, according to updated projections from the Independent Fiscal Institution (IFI), a Senate-affiliated fiscal policy watchdog.
In June, the IFI had forecast debt levels of 78% and 81.3% of GDP for the respective periods. The worsened outlook stems from higher real interest rates and deteriorating projections for the public sector primary deficit, encompassing the federal government, states, municipalities, and state-owned enterprises.
In its baseline scenario, the IFI also projects that gross debt will rise to 116.3% of GDP by 2034, from its previous estimate of 100.6% released in June.
According to the IFI, the anticipated growth in gross debt underscores the challenges of meeting the central government’s primary balance targets.
“The targets rely fundamentally on increasing recurring primary revenues and controlling primary spending. It is crucial to highlight risks that could undermine projected economic growth or frustrate the Executive branch’s proposed measures to boost revenue in the coming years. Realization of such risks could affect confidence in the medium- and long-term sustainability of public finances,” the IFI noted.
The institution estimates that, considering the gross debt level of 73.8% of GDP at the end of 2023, a consolidated public sector primary surplus of 2.4% of GDP per year would be required to stabilize the debt.
