By Jamie McGeever
BRASILIA (Reuters) – Brazil’s national debt and public-sector deficit surged to record highs in May, figures showed on Tuesday, reflecting the squeeze on the country’s finances from the second full month of social isolation and quarantine to combat the COVID-19 pandemic.
The deterioration in the public accounts back up Treasury Secretary Mansueto Almeida’s comments on Monday that debt will likely exceed 95% of gross domestic product this year and the primary budget deficit is on course to top 11% of GDP.
With tax revenues at a 15-year low and emergency spending soaring, the Economy Ministry is expected to announce new debt and deficit forecasts later on Tuesday.
According to the central bank, Brazil’s gross debt rose to a record 81.9% of GDP in May, higher than the 81.3% forecast in a Reuters poll of economists, while net debt rose to 55.0% of GDP, also higher than expected.
The overall public sector posted a record primary budget deficit excluding interest payments of 131.4 billion reais ($24 billion) in May, the central bank said, less than the 135 billion reais deficit forecast in a Reuters poll.
As a share of GDP over the 12 months to May, the primary deficit widened to 3.9% from 2.26% in the 12 months to April, the widest deficit since the data series began in 2002, according to central bank figures.
Almeida has said that the broad public-sector primary deficit this year could exceed 800 billion reais, or 11% of GDP.
But he and a raft of officials from the Economy Ministry and central bank insist that the emergency spending is temporary, and that the government’s fiscal rules, such as the spending cap, will be honored.
A resumption of the government’s austerity agenda is critical to getting public finances back on an even keel, paving the way for private-sector investment and a sustainable economic recovery, they say.
(Reporting by Jamie McGeever; Editing by Chizu Nomiyama and Jonathan Oatis)
