According to the Central Bank, the consolidated public sector’s nominal deficit rose by R$494 billion ($98.8 billion) within a year.
Finance Minister Fernando Haddad, seen with a worried expression, highlighted in 2023 the impact of the high Selic rate on the fiscal deficit.
The nominal outcome, which includes debt interest payments, reached a deficit of R$991.9 billion ($198.38 billion) over the 12 months leading up to January.
This negative balance is close to the historical highs recorded from October 2020 to February 2021 during the COVID-19 pandemic.
The R$1 trillion ($200 billion) gap has been exceeded in four months throughout history: October 2020, December 2020, January 2021, and February 2021.
The largest deficit, R$1.016 trillion ($203.2 billion), was reported in January 2021.
During that period, federal entities increased spending to mitigate the pandemic’s adverse effects on Brazilians.
The Central Bank’s data cover the consolidated public sector, which comprises the Union, States, municipalities, and state-owned enterprises.
In January 2023, the 12-month accumulated nominal deficit stood at R$ 497.8 billion ($99.56 billion), marking a R$ 494.1 billion ($98.82 billion) increase over one year.
Public debt interest expenses have surged in this interval.
Over the 12 months to January, the consolidated public sector incurred R$745.9 billion ($149.18 billion) in expenses, the highest in the historical series starting in 2002.
Analyzing the public accounts without interest payments reveals a primary deficit of R$246 billion ($49.2 billion) in the 12 months up to January.
In March 2023, Minister Haddad stated that the elevated Selic rate contributes to a higher fiscal deficit.
The increasing cost of financing Brazil’s debt
Central Bank data indicates the increasing cost of financing Brazil’s debt.
In October 2020, when the nominal deficit first surpassed the R$1 trillion ($200 billion) mark, the basic interest rate was 2% per annum.
It currently stands at 11.25%. A significant portion of the debt is linked to the Selic rate, meaning higher interest rates increase the public sector’s financing effort.
The Gross Government Debt (GGD) was at 75% of the Gross Domestic Product (GDP), rising by 3.7 percentage points in one year.
In January, it reached its highest level since July 2022, amounting to R$ 8.2 trillion ($1.64 trillion).
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