Brazil Interest Burden Hits Highest Level Since 2016

Brazil's interest burden reached 8.99% of gross domestic product in the 12 months ending in September, marking the highest level since January 2016. Data from the Central Bank of Brazil indicates that interest payments are now the primary driver of debt growth, as the nominal fiscal deficit hit 9.51% of GDP while the primary deficit remained low at 0.52%.

While gross debt held steady at 82.9% of GDP in September, net debt climbed to a record 70.0%, the highest level since the data series began in 2001. These fiscal pressures coincide with the benchmark Selic rate remaining at 13.75%.

Luiz Inácio Lula da Silva, who recently secured reelection for a new four-year term, faces the challenge of stabilizing public debt while attempting to fulfill campaign promises for increased public spending. The Central Bank of Brazil is scheduled to make its next interest rate decision on November 4.