Key facts
- Brazil's budget deficit reached 9.99% of GDP in the 12 months through June.
- The deficit is the highest since April 2021, when it was 10.25% of GDP.
- Interest payments accounted for the bulk of the nominal deficit, reaching 8.80% of GDP.
- Gross public debt rose to 81.9% of GDP in the 12 months through June.
- Since January 2023, Brazil's gross debt has increased by 10.2 percentage points of GDP.
Brazil's budget deficit widened to 9.99% of gross domestic product (GDP) in the 12 months through June, reaching its highest level since April 2021, according to central bank data. This widening shortfall, equivalent to 1.3 trillion reais ($257.03 billion), is largely attributed to elevated interest costs amid high interest rates and risk premiums, which many economists view as Brazil's most significant fiscal vulnerability.
Investors remain skeptical about the government's ability to stabilize debt as public spending continues to rise. The deficit figure also highlights Brazil's weaker fiscal position compared to peers, exceeding the International Monetary Fund's projected average deficit of roughly 6% for emerging market and middle-income economies this year.
In the 12 months through June, interest payments constituted 8.80% of GDP, forming the majority of Brazil's nominal deficit, while the primary deficit stood at 1.19% of GDP. Gross public debt climbed to 81.9% of GDP, surpassing economists' forecasts. Since President Luiz Inacio Lula da Silva assumed office in January 2023, Brazil's gross debt has increased by 10.2 percentage points of GDP. In June alone, the nominal interest bill was 110.7 billion reais, contributing to an overall deficit of 166 billion reais for the month, which was higher than market expectations.