Brazil's net debt at 63.7% of GDP in July

Brazil's net debt at 63.7% of GDP in July

Brazil's net debt reached 63.7% of its Gross Domestic Product (GDP) in July 2025, according to recent data from the country's Treasury. This figure, which marks a significant increase from the previous year, reflects the ongoing fiscal challenges faced by the Brazilian government. The primary budget deficit for July alone stood at 59.124 billion reais ($10.9 billion), more than six times the deficit from the year-earlier period [1].

The primary deficit in July was primarily driven by a 28.3% inflation-adjusted rise in government spending, largely due to court-ordered payments and pension benefits. While net revenue increased by 3.9%, the overall spending surge led to a substantial deficit. This is the worst July deficit since 2020, when the COVID-19 pandemic significantly impacted government finances [1].

The 12-month deficit reached 34.1 billion reais, equivalent to 0.3% of GDP, which falls short of the government's official target for 2025 of a zero-figure deficit with a tolerance band of 0.25% of GDP [1].

Economists are increasingly concerned about the rising household debt in Brazil. In June, delinquency in non-earmarked credit to individuals reached 6.3% of the total portfolio, up 0.8 percentage points over 12 months. This is driven by high debt service levels, which have increased to 27.8% of household income, just shy of the record 27.9% reached in May 2023 [2].

The Central Bank of Brazil has acknowledged that the rise in delinquencies is genuine and not solely due to accounting changes. The current high interest rates are making it harder for households to service their debt, and this could exacerbate economic slowdown if the slowdown turns out to be sharper than anticipated [2].

The political landscape is also playing a significant role. President Luiz Inácio Lula da Silva's approval ratings have climbed to 46% in August 2025, driven by falling inflation and a nationalist stance against U.S. tariffs. This political stability could influence economic policies and investor sentiment [3].

However, the rising household debt and the potential for a sharper economic slowdown pose risks to Brazil's economic stability. While the government has measures in place to provide some relief, such as income tax exemptions and increased Bolsa Família transfers, the long-term outlook remains uncertain. Investors are closely watching these developments to gauge the potential impact on Brazil's economic performance [2].

References:
[1] https://money.usnews.com/investing/news/articles/2025-08-28/brazils-central-government-posts-10-9-billion-primary-deficit-in-july
[2] https://valorinternational.globo.com/economy/news/2025/08/25/rising-household-debt-heightens-risks-as-brazil-cools.ghtml
[3] https://www.ainvest.com/news/assessing-political-economic-risks-brazil-2026-election-2508/