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Bolsonaro Succeeds in Cutting Brazil’s Public Debt for Ninth Consecutive Month

Bolsonaro succeeds in cutting Brazil's public debt for ninth consecutive month

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Brazil’s public debt fell in July for the ninth consecutive time to stand at the equivalent of 77.6% of Gross Domestic Product (GDP), in line with the fiscal deficit, which fell to 3.83% of GDP, the Central Bank reported Wednesday.

Latin America’s largest economy decreased its gross debt by 0.4 percentage points with respect to June, mainly as a consequence of the “effect of nominal GDP growth” and “net debt amortizations,” the issuing body said in a note.

Brazil’s public debt has been on a downward trend since it reached 90% of GDP at the beginning of last year, when the federal government increased spending to mitigate the impact of the coronavirus pandemic.

In the following months, there was some slight rebound, but since October it has only recorded declines, making nine in a row so far.

The record tax collection, together with the slight recovery of the main macroeconomic indicators, has made it possible to reduce the debt-to-GDP ratio.

On the other hand, the nominal fiscal deficit, which includes the result of the primary public sector and debt interest payments, also fell from 4.23% of GDP in June to 3.83% reported last month, in the year-on-year comparison.

The fall was made possible by the fact that Brazil recorded a primary surplus last July, which includes the accounts of the federal, regional and municipal governments and some public companies, but excluding interest, of 20.4 billion reais (about 4 billion dollars).

This figure was a record for the month since the historical series began in December 2001.

The Brazilian economy is in a recovery phase after rebounding by 4.6 % in 2021, when it overcame the 3.9 % drop it recorded in 2020 due to the effects of the coronavirus pandemic, although it suffers from high inflation of 10 % year-on-year.

For this year, Jair Bolsonaro’s government forecasts a GDP expansion of 2.0%, in line with financial market expectations and slightly above the 1.7% targeted by the International Monetary Fund (IMF).

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