Brazil’s Fiscal Watchdog Sees Debt Climbing To 82% Of GDP By 2026

Brazil’s independent Fiscal Institution (IFI), which reports to the Federal Senate, projects the country’s gross public debt will reach about 77.6% of GDP in 2025 and 82.4% in 2026, extending an upward trajectory through 2035 unless policy settings change.

The assessment lands as Brasília grapples with tighter budgets, stubborn borrowing costs and slowing momentum in revenue measures.

The projection is built on three moving parts: recurring primary deficits under current fiscal rules, real interest rates near 5.1%, and average real GDP growth around 2.2%.

On that math, merely stopping debt from rising would require a primary surplus of roughly 2.1% of GDP—significantly stronger than recent outcomes. The task became harder after the expiration of Provisional Measure 1,303, which lawmakers pulled from the agenda.

The lapse leaves an estimated R$20 billion gap in the 2026 plan, prompting the government to search for alternative revenue or spending offsets.

Congress has signaled resistance to a higher tax take, which already hovers around one-third of GDP and has trended upward over the past three decades.

IFI Flags Acute Fiscal Pressure on Federal Budget

IFI describes an “acute fiscal constraint”: mandatory expenditures increasingly bind the federal budget; the high debt-to-GDP ratio and repeated primary deficits crowd out public investment; and interest payments absorb a growing share of resources.

Executive director Marcus Pestana has warned that public spending faces real limits and that debt dynamics should consider an intergenerational pact—today’s consumption financed by tomorrow’s taxpayers has consequences that will eventually have to be addressed structurally.

There is also a federative angle. States and municipalities, on average, are in a healthier fiscal position than the Union and have been investing more than the federal government.

Recent measures seek to manage subnational strains: Complementary Law 212/2025 (PROPAG) outlines another renegotiation of state debts with the Union, while Constitutional Amendment 136/2025 caps court-ordered payments (precatórios) for states and municipalities and eases terms for pension-related arrears.

None of this eliminates the need for sustained federal primary surpluses. The next markers to watch are the 2026 budget’s primary-balance path, the durability of elevated real interest rates, and any replacement package to fill the revenue hole left by MP 1,303.

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