Key Points
- IFI and Ipea say debt and mandatory spending are rising faster than adjustment capacity.
- The 2023 fiscal rule caps spending growth, but carve-outs are eroding confidence.
- With the Selic at 15% and rapid aging, delay raises the eventual bill.
Brazil is not facing an overnight funding stop. The risk is a slow squeeze: more spending is locked in by law, while the fiscal rule looks increasingly flexible.
IFI, the Senate-linked fiscal watchdog, projects gross public debt around 79.0% of GDP in 2025 and 117.7% by 2035 in its base scenario. It also shows wide outcomes: an optimistic path falls to 83.4% by 2035, while a pessimistic one climbs to 162.2%.
Near-term forecasts also point upward. UBS Wealth Management expects debt to end 2025 at 79.6% of GDP. The government’s Prisma Fiscal survey shows a median forecast of 79.49% in 2025 and 83.70% in 2026, with the 2026 average at 83.79%.
The pressure point is the primary balance. IFI estimates a 2026 primary deficit of R$90.6 billion, about 0.7% of GDP.
BPC, paid to low-income elderly and disabled Brazilians, covered about 6.5 million people in October 2025, up 3.5% year on year. IFI projects BPC spending at R$143.2 billion in 2026, roughly 1.1% of GDP.
Brazil’s 2023 fiscal framework links real spending growth to revenue, typically 70% of real revenue growth, with a 0.6% floor and a 2.5% ceiling.
If targets are missed, the link can drop to 50%. IFI says more than R$170 billion is being executed or scheduled outside effective limits early on, feeding doubts about enforcement.
On taxes, Ipea estimates 35.1% of GDP in 2024, while the National Treasury’s method puts 2024 at 32.32%, highlighting how contested the room for more revenue has become.
For investors abroad, this is about risk pricing. If debt stabilisation looks uncertain, rates stay higher and FX gets jumpier. Demographics intensify it: IBGE data show the 60+ share rose from 8.7% in 2000 to about 15.6% by 2023, projected at 37.8% by 2070.