Brazil's debt rose less than forecast in 2025

By Marcela Ayres

BRASILIA, Jan 30 (Reuters) - Brazil's gross debt rose in 2025, driven mainly by interest expenses, but the 2.4 percentage-point increase was smaller than economists had expected, central bank data showed on Friday.

The country's gross debt reached 10 trillion reais ($1.9 trillion) in December, equivalent to 78.7% of gross domestic product - up from 76.3% a year earlier, but below the 79.5% forecast in a Reuters poll.

Brazil's gross debt ratio is higher than that of many emerging market economies and has climbed since end-2022, largely due to elevated interest rates that determine the financing cost of nearly half of the country's public debt stock.

The central bank has kept its benchmark interest rate unchanged at 15% since July, the highest level in nearly two decades, as it seeks to steer inflation back to its 3% target.

Previous fiscal stimulus and higher public spending under President Luiz Inacio Lula da Silva, who took office in 2023, have led to market scepticism that the goal can be reached.

Interest expenses in 2025 were 7.91% of GDP, down from 8.07% in 2024, but still representing a significant burden.

The public sector posted a primary deficit of 0.43% of GDP for the year, marginally wider than the 0.40% deficit recorded a year earlier.

Treasury Secretary Rogerio Ceron said Brazil would work to lower its gross debt-to-GDP ratio once it begins posting primary surpluses of between 0.5% and 1% of GDP.

Alberto Ramos, head of Latam Economics at Goldman Sachs, said placing Brazil's debt on a sustained downward path and rebuilding fiscal buffers remained a major challenge, as this would require structural primary surpluses above 2% of GDP.

"Such an outcome is highly unlikely in the near term, in our view," he said, forecasting the country's debt to reach 83.6% of GDP in 2026.

The central government is targeting a primary surplus of 0.25% of GDP this year, a goal viewed skeptically by economists surveyed weekly by the central bank, who instead forecast a 0.53% of GDP deficit.

Overall, Brazil's nominal fiscal balance showed a deficit of 8.34% of GDP in 2025, narrower than the 8.47% shortfall in 2024, but above 8% for a third straight year.

($1 = 5.1967 reais)