Brazil Nominal Fiscal Deficit Hits Highest Level Since 2021

The Central Bank of Brazil reported that the nation's nominal fiscal deficit widened to nearly 10% of GDP for the 12 months ending June 2026, marking the highest level since 2021. This shortfall is primarily attributed to high debt-servicing costs, with nominal interest payments totaling R$1.11 trillion, or 8.48% of GDP, in the year leading up to May. In June alone, the nominal shortfall reached R$166 billion.

Despite the nominal deficit, the primary deficit—which excludes interest payments—stood at approximately R$137 billion, or 1% of GDP. This figure aligns more closely with the zero-deficit target the federal government of Brazil communicated to the International Monetary Fund. Gross general government debt reached 81.1% of GDP by June 2026.

To combat inflation, the Central Bank of Brazil reduced the benchmark Selic rate by 25 basis points to 14.25% in June. However, the high interest rate continues to increase the government's interest expenses during an election year.