Public Debt Reaches 90% of GDP and Puts Pressure on the Economy

Public debt of Brazil has shown significant growth, reaching 77.6% of GDP in July.

This increase reflects growing public spending, which has put pressure on interest rates and compromised the country's economic growth.

In this article, we will explore the implications of this debt growth, the IMF's recommendations, a comparison of Brazil's fiscal situation with other Latin American and Eurozone countries, and future projections that indicate a challenging scenario through 2033. We will also analyze the outlook of credit rating agencies and the urgent need for strict spending controls to reverse this worrying trajectory.

Current Overview of Brazilian Public Debt

The increase in Brazilian public debt 77.6% of GDP, which corresponds to R$ 9.6 trillion in July, it puts significant pressure on investor confidence and the country's fiscal space.

This scenario results in high interest rates, as the financial market assesses Brazil as a greater risk, demanding higher returns on its investments.

This directly affects economic growth, as businesses and consumers face higher borrowing costs, inhibiting new investment and consumption.

Furthermore, fiscal space is narrowing, limiting the government's ability to implement public policies and invest in infrastructure.

The high debt puts Brazil in an unfavorable position, above the Latin American average, and reinforces the urgent need for control of public spending to regain credibility and attract foreign capital.

For further information on the data, you can consult directly news about the Brazilian economy.

IMF Criteria and Economic Impacts

The criterion of IMF for calculating Brazilian debt is particularly important because it can raise debt to 90% of GDP according to their own methodologies.

This calculation includes all bonds issued by the National Treasury, which is significantly different from traditional calculations used internally.

This has significant implications for the Brazilian economy, especially with regard to interest rates and economic growth.

High debt directly impacts government borrowing costs, leading to higher interest rates.

With higher interest rates, the cost of credit for companies and individuals rises, inhibiting private investment and consumption.

This, in turn, limits the country's economic growth, making it more difficult to reduce debt-to-GDP ratios in the long term.

It is important to highlight the three main components that lead to 90% of GDP:

• 1. Comprehensive inclusion of liabilities.
• 2. Consideration of National Treasury bonds.
• 3. More stringent criteria compared to local methods.

Thus, adopting the standard of IMF significantly influences Brazil's economic policy, shaping how the market and foreign investors perceive the country's fiscal health, which may affect addictive economic policies in the future.

IMF Recommendations for Debt Transparency

By recommending that Brazil adopt international standards that account for all securities issued by the National Treasury, the International Monetary Fund (IMF) seeks to improve the transparency and reliability of the country's fiscal statistics.

Applying the IMF criteria would raise public debt to more accurate levels, thus increasing the confidence of international investors.

Transparency in debt measurement is essential to attract more investment, as it provides a clearer picture of the country's fiscal health and promotes a more stable economic environment.

According to the IMF, this practice “

facilitates economic planning and the implementation of more responsible fiscal policies

“.

Furthermore, greater transparency helps mitigate the risks associated with adverse economic surprises.

The effort to adopt international standards has been recognized as an important measure for aligning with global best practices, as explained in the IMF in recent recommendations.

This not only improves the country's image on the international economic stage, but also promotes greater fiscal responsibility within Brazilian government spheres.

Brazilian Debt in Regional and European Perspective

Brazil's current debt scenario compared to Latin America and the Eurozone demonstrates an alarming situation.

With a debt/GDP ratio of high level, Brazil stands out negatively in the region.

Furthermore, rising debt puts pressure on interest rates and impedes the country's sustainable economic growth.

According to the rules of IMF, the calculation includes all bonds issued by the Treasury, raising Brazil's indicators.

If the country does not implement measures to control public spending, the projection for 2028 is that the debt will reach 84.3% of GDP, climbing to 96% by 2033. This places Brazil in a delicate position in the global economic scenario, requiring great attention and effective fiscal measures.

Debt Projections until 2033

Brazil's debt projections through 2033 reveal a significant increase in public debt, in accordance with IMF standards.

In 2028, debt is expected to reach 84.3% of GDP, indicating a scenario where public spending exceeds the country's economic capacity.

This trajectory highlights a high risk of fiscal unsustainability that could further undermine investor confidence.

By 2033, the debt is expected to advance to 96% of GDP, bringing Brazil closer to unsustainable debt patterns.

This increase puts pressure on the government to implement effective spending control measures, avoiding a negative impact on interest rates and, consequently, on economic growth.

The prospect of above-average debt levels in Latin America and the Eurozone reinforces the urgency of action to stabilize the fiscal trajectory and ensure favorable macroeconomic conditions.

The absence of effective measures could severely limit the country's development potential.

Assessment of Risk Agencies and the Need for Fiscal Adjustment

The assessment of risk agencies as Fitch Ratings It is Moody's highlights the need for urgent fiscal adjustment for Brazil to regain investor confidence.

Both agencies indicate that Brazil's fiscal situation is an obstacle to returning to investment grade in the short term.

According to a report by Moody's, the fiscal fragility prevents progress.

The recommendation is clear: controlling public spending is crucial to stabilizing debt-to-GDP.

.

A Fitch reinforces the concern with the management of public accounts, pointing to need for credibility in economic policies.

This challenging scenario demands swift action to avoid a worrying debt trajectory, potentially comparable to that of Eurozone countries.

Without effective spending control, Brazil may face even greater difficulties in achieving healthier financial indicators.

Public debt Brazilian society presents significant challenges and requires immediate attention.

Only by implementing strict spending controls can the country improve its fiscal situation and regain investor confidence.