RIO DE JANEIRO, BRAZIL – The accelerated repayment by state-owned banks to the Treasury will lead to the Central Government’s Gross Debt (DBGG) closing out 2019 between 76 and 77 percent of Gross Domestic Product (GDP), said National Treasury Secretary Mansueto Almeida yesterday.
The new projection is more optimistic than the one published last month, which suggested that the indicator would close the year at 80.8 percent of GDP.
The indicator considering the gross debt of the federal, state and municipal governments, called DBGG, closed 2018 at 77.2 percent of GDP. This is the main parameter used to draw international comparisons on the country’s indebtedness.
Almeida explained that anticipating the repayment of R$30 billion by the National Bank for Economic and Social Development (BNDES) to the Treasury alone represents some 0.5 percent of the country’s GDP.
The measure was approved by the bank’s board of directors in early November, raising the total amount returned to the Treasury this year to R$123 billion.
The secretary further announced that the Caixa Econômica Federal will also return Hybrid Capital and Loan Instruments (IHCD) held by the institution, but failed to report the amount. Through these repayments, public banks will return to the government resources injected by the Treasury in previous governments to increase the lending capacity of official financial institutions. At the time, these transactions raised the government’s gross debt.
The reduction in the SELIC (basic interest rate), which is at its lowest level in history, has also contributed to securing the government’s indebtedness. “We will end the year with a primary [negative] result of approximately one percent of GDP and, with the interest rate trajectory in place, instead of a nominal deficit of seven percent of GDP with a nominal deficit of around six percent of GDP,” Mansueto said.
According to Almeida, three years ago the financial market projected that the basic interest rates of the economy would end at an annual rate of ten percent in 2019. He reiterated that the drop in interest rates helped stabilize public sector indebtedness, generating an effect similar to the existence of the primary surplus, when the government is able to save resources to pay the interest on the public debt.
The Ministry of Economy has previously announced that the Central Government would end the year with a primary deficit of around R$80 billion, a significant drop in relation to the original R$139 billion target.