Brazil's Gross Debt Rises Less Than Expected in 2024 Amid Central Bank's Intervention
Brazil's gross debt increased less than anticipated in 2024, supported by the central bank's sale of foreign reserves in December. The month witnessed intense exchange rate volatility due to fiscal concerns, according to official data released on Friday.
Brazil's Debt-to-GDP Ratio Declines
A crucial measure of fiscal health, Brazil's gross debt-to-GDP ratio dropped to 76.1% in December, down from 77.7% in November. This decline outperformed economists' expectations, as a Reuters poll had predicted the year-end figure at 77.0% of GDP.
Despite this improvement, Brazil's total debt still increased by 2.2 percentage points over the year, driven largely by substantial interest payments, according to the central bank.
Central Bank's Forex Intervention Stabilizes Market
Amid sharp depreciation of the Brazilian real, the central bank executed significant foreign exchange interventions in December, including spot dollar sales and dollar repurchase agreements totaling over $30 billion.
The real fell to a low of 6.30 per U.S. dollar in December, a period usually marked by corporate profit remittances. However, investor sentiment worsened following the government's disappointing spending cut package in late November. On Thursday, the real closed at 5.85 per dollar.
Public Sector Reports Stronger-Than-Expected Surplus
In December, Brazil's public sector posted a primary surplus of 15.745 billion reais, surpassing the 10.2 billion reais forecasted in a Reuters poll. The central government alone achieved a primary surplus of 26.728 billion reais, reducing the annual deficit to 45.364 billion reais (0.38% of GDP)—a marked improvement from the 2.42% of GDP deficit recorded in 2023.
The Brazilian Treasury announced on Thursday that the country successfully met its fiscal target of a zero primary deficit, allowing for a 0.25% tolerance margin. Adjustments, including expenses related to severe flooding in Rio Grande do Sul, brought the 2024 shortfall to just 0.09% of GDP.
Key Takeaways for Investors and Economists
Brazil's debt-to-GDP ratio improved, finishing lower than projections.
Massive forex interventions helped stabilize the real after a sharp depreciation.
Primary surplus exceeded expectations, signaling improved fiscal discipline.
Government fiscal targets were met, reinforcing investor confidence.
As global markets continue to monitor Brazil’s economic stability, these fiscal trends could shape investment decisions, interest rates, and currency movements in the coming months.
($1 = 5.8747 reais)