Public accounts had a deficit of R$56.1 billion in May; Debt rises to highest level in five years

The consolidated public sector accounts showed a primary deficit of R$56.1 billion in May, the Central Bank (BC) reported this Tuesday (30).
The primary deficit occurs when revenues from taxes and duties fall below government expenditures. If the opposite happens, the result is a primary surplus.
The result does not take into account the payment of interest on public debt, and covers the federal government, states, municipalities and state-owned companies.
In comparison with May last year, there was a worsening, as a negative balance of R$33.7 billion was recorded that month.
See below the performance of the accounts in May this year:
federal government recorded a negative balance of R$55.2 billion;
states and municipalities had a deficit balance of R$ 1.2 billion;
state-owned companies had a surplus of R$ 273 million.
Part of the year
In the accumulated result for the first five months of this year, according to official data, government accounts recorded a primary deficit of R$ 24.9 billion - equivalent to 0.45% of the Gross Domestic Product (GDP).
As a result, there was a worsening in comparison with the same period last year, when a positive balance of R$ 69.1 billion (1.34% of GDP) was recorded.
This worsening is related, among other factors, to the advance payment of court orders this year by the National Treasury Secretariat.
In the case of the federal government alone, the result was negative by R$ 46.1 billion in this year's partial, informed the BC, against a surplus of R$ 31.2 billion in the first five months of 2025.
For this year, the goal is for the government's accounts to have a negative balance of 0.25% of the Gross Domestic Product (GDP), around R$34.3 billion.
According to the fiscal framework, approved in 2023, there is a tolerance interval of 0.25 percentage points in relation to the central target.
In other words: the target will be considered formally met if the government has a zero balance, or if it reaches to a surplus of R$68.6 billion
The text, however, allows the government to remove R$63.5 billion in expenses from this calculation. And use these resources to pay, for example, court orders (expenses on court sentences, defense and education).
After interest expenses
When interest on public debt is incorporated into the account - in the concept known in the market as nominal result, used for international comparison -, there was a deficit of R$ 163.7 billion in the public sector accounts in May.
➡In the accumulated 12 months up to May, a negative result (deficit) of R$ was recorded 1.26 trillion, or 9.62% of GDP.
This number is closely monitored by risk rating agencies to define the countries' credit rating, an indicator taken into consideration by investors.
The nominal result of the public sector accounts is impacted by the monthly result of the accounts, the BC's actions on the exchange rate, and the economy's basic interest rates (Selic) set by the institution to contain inflation. Currently, the Selic rate is at 14.25% per year, a high level.
According to the BC, nominal interest expenses totaled R$1.1 trillion (8.5% of GDP) in the twelve months up to May this year.
Public debt
With the deficit in public accounts in May, the debt of the consolidated public sector rose 0.9 percentage points, to 81.1% of GDP - the equivalent of R$ 10.62 trillion.
➡This is the highest level for public debt since May 2021, when it amounted to 81.4% of GDP, that is, it is the highest level in five years.
➡In the accumulated result of the government of President Luiz Inácio Lula da Silva (PT), that is, in just over three years, the debt has already increased by 9.4 percentage points. The increase in debt is mainly related to the increase in public spending and interest expenses.
➡For the International Monetary Fund (IMF), an international concept - which considers public bonds in the BC's portfolio -, Brazilian debt was much higher in May: 94.3% of GDP.
The proportion to GDP is considered by experts as the most appropriate concept for measuring and comparing the debt of nations. And the calculation format of the International Monetary Fund (IMF) is adopted internationally.
➡Above 90% of GDP, the level of Brazilian debt is well above emerging nations and South American countries, also higher than the average of Eurozone nations (according to IMF data).
To try to contain debt growth, in 2023 the government approved the so-called "fiscal framework", that is, new rules for public accounts replacing the spending cap. According to these rules:
expenditure cannot grow by more than 70% of the increase in revenue;
the increase in spending is limited, in real terms, to 2.5% per year;
the framework seeks precisely to contain the growth of public debt in the future.
Without a robust cut in expenditure, necessary to keep the fiscal framework standing, public accounts experts estimate that the rule will have to be abandoned, or changed, in the coming years.
They argue that, in the current format, the rules will become unsustainable.
Because of this, they predict a greater expansion of public debt in the future, which could result in an increase in interest rates charged by financial institutions to the real sector of the economy.
Financial market analysts estimated, last week, that Brazilian public debt should reach 100% of GDP in 2035 (according to the Brazilian concept) - a level far removed from emerging countries and closer to Europe.
➡Pelo concept adopted by the IMF, Brazilian debt would be above 110% of GDP in 2035.

Source: G1