Brazil sees worsening debt outlook despite rising primary surplus targets
BRASILIA (Reuters) - Brazil’s government on Tuesday projected a sharp rise in gross debt despite an outlook for an improving primary balance, including a 0.25% of gross domestic product surplus target for 2026 and more ambitious goals in the following years.
In its annual budget guidelines bill, which requires congressional approval, President Luiz Inacio Lula da Silva’s administration projected primary surplus targets of 0.5% of GDP in 2027, 1.0% in 2028, and 1.25% in 2029.
Still, gross public debt is expected to continue rising, peaking at 84.2% of GDP in 2028, driven by high interest payments in Latin America’s largest economy.
The new budget outlook represents a notable deterioration from estimates published late last year, when Brazil’s Treasury forecast the gross debt-to-GDP ratio - a key indicator of a country’s solvency - to peak at 81.8% in 2027.
The revision reflects expectations of higher interest rates following an aggressive monetary tightening cycle by the central bank to curb inflation, partly fueled by government spending.
The bill forecasts the benchmark Selic interest rate to reach a cumulative 14.02% this year, 12.56% in 2026, 10.09% in 2027, 8.27% in 2028, and 7.27% in 2029. The rate currently stands at 14.25%, and the central bank has already signaled another hike in May.
The Brazilian real closed at 5.89 reais per dollar on Tuesday, while Brent was priced at $64.67.
