Brazil Interest Burden Hits 9% of GDP, Highest Since 2016

Brazil's interest bill climbed to 8.99% of gross domestic product in the 12 months through September, a level not seen since January 2016, central bank data showed on Thursday. The public sector's primary deficit stood at 0.52% of GDP, driving a nominal fiscal deficit of 9.51% of GDP. In September alone, the public sector posted a primary deficit of 5.5 billion reais ($1.03 billion), against expectations for a 500 million reais surplus in a Reuters poll, while interest expenses reached 107.5 billion reais. Gross debt held steady from August at 82.9% of GDP. Investors demand a hefty premium to finance a government whose debt burden has risen rapidly amid fiscal uncertainty and expanding mandatory spending. An increasing share of debt is linked to the Selic benchmark rate, now at 13.75%, heightening sensitivity to high rates. Since President Luiz Inacio Lula da Silva took office in 2023, gross debt has risen 11.3 percentage points of GDP. Lula secured reelection on Sunday.