Public debt falls for the 3rd month in a row and stands at 84.5% of GDP in May – Prime Time Zone

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Central Bank figures show a 1.1 percentage point drop compared to April; ratio reached 90% in February

Rafael Neddermeyer / Public PhotosPublic sector returns to record deficit in May after two consecutive months of positive results

The government’s public debt retreated in May to 84.5% of the Gross Domestic Product (GDP), a reduction of 1.1 percentage point compared to the previous month, informed the central bank this Wednesday, 30. The Gross Debt of the General Government (DBGG), which comprises the federal government, INSS and state and municipal governments, fell for the third consecutive month, reaching R$ 6.69 billion. According to the monetary authority, the reduction reflects the appreciation of the real against the dollar, nominal GDP growth, net debt issues and incorporation of nominal interest. In 2021, the DBGG to GDP ratio declined by 4.4 percentage points. The index was 90% in February, mainly impacted by the increase in federal government spending to combat the new coronavirus.

Public accounts registered a deficit of R$ 15.5 billion in May, interrupting two consecutive months of positive results. There was a primary deficit of R$ 20.9 billion in the central government and surpluses of R$ 5.2 billion in regional governments and R$ 134 million in state companies. In the first five months of 2021, the consolidated public sector registered a primary surplus of BRL 60.3 billion, compared to a deficit of BRL 214 billion in the same period in 2020. The value came in better than expected by market analysts. “The news brings good winds to the markets, especially in light of the discussions about the fiscal risks of the tax reform. Tax collection should continue to be an important positive anchor, pointing to an even greater than expected drop in debt,” says Rachel de Sá, head of economics at Rico Investimentos. “However, despite the short-term relief leveraged by inflation, the fiscal context remains a central factor in the country’s perception of risk.”