Brazil's Public Debt Hits 82% of GDP, Highest Since 2021

Brazil's public debt has reached 82% of its Gross Domestic Product (GDP) as of June, marking the highest level since April 2021, according to data released by the Central Bank on Friday, May 31st. This figure represents the consolidated gross debt of the public sector, encompassing the federal government, social security, states, municipalities, and state-owned companies. The total debt increased from R$ 10.6 trillion to R$ 10.8 trillion in June. Since the beginning of President Luiz Inácio Lula da Silva's administration, the debt-to-GDP ratio has risen by approximately 10 percentage points, approaching the historical peak of 87.6% recorded in October 2020 during the COVID-19 pandemic. Experts, including former Central Bank President Gustavo Loyola, warn that high public debt can stifle both public and private investment by driving up interest rates, as the government absorbs available capital. Samuel Pessoa, a researcher at Fundação Getulio Vargas (FGV), emphasized the challenge of controlling public spending growth relative to economic expansion, noting that rising expenses necessitate higher tax revenues, which societies are often unwilling to bear. Finance Minister Dário Durigan acknowledged the need for spending cuts to facilitate interest rate reductions but did not outline specific measures. Separately, state-owned enterprises reported a combined deficit of R$ 7.8 billion in the first half of the year, the worst performance since 2002, with the postal service alone accounting for over R$ 4 billion in losses by May. Economist André Perfeito suggested that chronically deficitary state companies might require privatization to halt financial losses and improve efficiency.