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The Central Bank Released Data That Calls Attention to the Fiscal Situation of the Country. In July, Public Accounts Recorded an Expressive Deficit, Considered the Worst Result in Four Years.
The consolidated public sector accounts registered a primary deficit of R$ 66.6 billion in July this year, according to the Central Bank (BC) on Friday (29).
The primary deficit occurs when tax and revenue receipts fall below government expenses. If the opposite occurs, the result is a primary surplus.
This calculation does not consider the payment of public debt interest and includes the Union, states, municipalities, and state-owned companies.
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Comparison with Previous Years
The BC highlighted that the negative balance was greater than that of July last year, when a deficit of R$ 21.3 billion had been recorded.
The number also represents the worst result for the month since 2020, during the Covid-19 pandemic, when the government’s extra spending resulted in a deficit of R$ 81.1 billion.
The amounts reported were not adjusted for inflation.
According to the National Treasury, the deterioration in July is directly linked to the payment of judicial expenses. Only for the month, this expenditure totaled R$ 35.6 billion.
In 2024, for example, the payment of court orders occurred in February, while this year it was concentrated in July.
Performance by Government Sphere
The negative performance was widespread. The federal government reported a deficit of R$ 56.4 billion. States and municipalities together had a negative balance of R$ 8.1 billion.
State-owned companies also contributed to the poor result, with a deficit of R$ 2.05 billion.
This scenario shows that all three management spheres, federal, state, and municipal, faced an imbalance. However, the largest impact came from the Union.
Year-to-Date
From January to July, the primary deficit of the consolidated public sector reached R$ 44.5 billion, equivalent to 0.61% of Gross Domestic Product (GDP). Despite the negative result, there was an improvement compared to the same period last year, when the deficit was R$ 64.7 billion, or 0.97% of GDP.
Only the federal government accumulated a deficit of R$ 68.8 billion in the first seven months, compared to R$ 79.3 billion in the same period of 2024. Therefore, even with a negative July, the year-to-date still shows a decrease in the fiscal deficit.
The federal government aims to eliminate the deficit by 2025. However, the fiscal framework allows a deficit of up to 0.25% of GDP, about R$ 31 billion, without the target being considered unmet. In addition, amounts related to court orders, around R$ 44.1 billion, are excluded from this calculation.
Nominal Result and Interest
When the interest on public debt is included, the result is called the nominal deficit. In July, this amount reached R$ 175.6 billion.
In the twelve-month accumulated total, the deficit reached R$ 968.5 billion, equivalent to 7.86% of GDP.
International credit agencies monitor this number closely, as it influences the assessment of the country’s credibility. According to the BC, nominal interest expenses totaled R$ 941.2 billion over twelve months, or 7.64% of GDP.
Public Debt on the Rise
The gross public debt of the consolidated sector rose in July and reached 77.6% of GDP, equivalent to R$ 9.6 trillion. Since the beginning of President Luiz Inácio Lula da Silva’s administration, in two and a half years, there has been an increase of 5.9 percentage points in this indicator.
According to the calculation by the International Monetary Fund (IMF), which includes public bonds held by the Central Bank, the debt is even higher.
The institution reported debt of 89.9% of GDP in July. This concept is considered the most appropriate for international comparisons.
Rules of the Fiscal Framework
To contain the advance of the debt, the government approved a new fiscal framework in 2023, which replaced the spending cap. The rules stipulate that expenditure can only grow up to 70% of revenue increases, with a real limit of 2.5% per year.
The objective is to curb the expansion of public debt in the coming years. However, without stronger cuts in expenses, experts warn that the model may not be sustainable.
Outlook
The financial market estimates that by 2034, Brazilian public debt will reach 93.5% of GDP, according to the government concept. This level approaches the figures of European countries and distances itself from emerging ones.
Therefore, even with a better year-to-date figure than in 2024, the July numbers raise alarms about the sustainability of public accounts and the fiscal challenges facing the country in the coming years.
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