In November, Brazil’s federal public debt surged to a record R$ 6.33 trillion ($1.31 trillion), marking a 2.48% rise from the previous month, October 2023.
The rise of R$ 153.11 billion ($31.57 billion) is the highest ever in its history.
The National Treasury reported this data on Wednesday (27 Dec). Public debt includes the government’s domestic and foreign liabilities.
In October, the figure stood at R$ 6.17 trillion ($1.27 trillion). The government issues this debt to cover the budget deficit.
In other words, it bridges the gap between spending and revenue from taxes and other sources.
This debt indicator is crucial.
Global agencies use it to assess Brazil’s ability to repay. In August, the debt reached what was then a peak of R$ 6.27 trillion ($1.29 trillion).
Since then, the Domestic Federal Public Securities Debt (DPMFi) has risen 2.49%, moving from R$ 5.93 trillion ($1.22 trillion) to R$ 6.08 trillion ($1.25 trillion).
This part of the debt is payable in the national currency.
The Treasury notes significant figures. They issued a net of R$ 99.94 billion ($20.61 billion) and recognized R$ 47.44 billion ($9.78 billion) in interest.
Meanwhile, the Federal External Public Debt (DPFe) grew 2.34%, reaching R$ 250.05 billion ($51.56 billion).
The debt relative to GDP rose to 74.7%
The debt relative to GDP rose to 74.7% in October. The Central Bank (BC) will release more details in January 2024. Their methodology is broad, including various government debts.
Moreover, the liquidity reserve increased by 11.43%, from R$ 815.60 billion ($168.04 billion) to R$ 908.86 billion ($187.28 billion).
This reserve is crucial for debt payment. It comes mainly from issuing bonds.
Lastly, different groups hold parts of this debt. Financial Institutions now hold R$ 1.76 trillion ($362.89 billion), while Investment Funds have R$ 1.42 trillion ($292.78 billion).
The Social Security group holds R$ 1.40 trillion ($288.66 billion), slightly less in relative terms.
These figures show the widespread impact of public debt and the diverse stakeholders involved.
Background
Brazil’s decision to increase debt for economic growth, championed by President Luiz Inácio Lula da Silva, presents a risky yet potentially transformative strategy.
This approach, diverging from traditional fiscal conservatism, raises critical questions about the sustainability and effectiveness of such economic policies.
When comparing Brazil’s debt strategy to its regional counterparts, stark contrasts emerge.
Argentina’s struggles with excessive borrowing have led to economic instability, while Chile’s conservative debt management has fostered more stable conditions.
This regional disparity underscores the risks associated with high national debt, particularly for emerging economies.
Globally, many countries in the Global South face similar challenges. Heavy borrowing often results in dependence on external funding and vulnerability to market changes.
Nations like Sri Lanka and Lebanon exemplify the dangers of unsustainable debt, facing severe economic crises due to their heavy borrowing.