One trillion in interest!

Most students enrolled in the fourth or fifth grade of elementary school have already begun to encounter decimal numbers in math classes. There, they learn from their teachers that the number 0,95 can be rounded to 1,00. By deduction, the number 950 can also be rounded to 1.000. Therefore, it is these rules that allow us to state that the federal government's interest expenses throughout 2024 reached the tragic mark of one trillion reais. A tragedy!

The Central Bank (BC) released its Monthly report with updated fiscal policy information.With the publication of this most recent bulletin, it is possible to consolidate the information for the 12 months of last year. In December, R$ 96 billion was spent on public debt interest. Although not a record in the monthly historical series, the amount is very high and ranks second in this category, only surpassed by the R$ 111 billion spent two months earlier, in October. This value represents a 51% increase compared to December 2023.

Interest rates: never before in the history of this country.

To avoid focusing solely on comparative variations between periods of just 30 days, it might be interesting to broaden the scope of the analysis. If we consider the last quarter, for example, we see that interest expenses reached a total of R$ 300 billion for the period between October and December of last year alone. This total represents a 77% increase compared to the R$ 169 billion that occurred for the same period in 2023. No other type of federal public spending variable has reached such an increase.

If the comparison is between the figures for the second half of the two fiscal years considered, the difference is also significant. For the period July/December 2024, total interest expenses reached R$ 496 billion. This amount represented a 30% increase compared to the R$ 381 billion recorded in the same period of 2023.

Finally, for the 12 months of 2024, the total amount of expenses for interest payments on public debt was R$ 950 billion, which, rounded up, brings us to the trillion mentioned in the article's title. This value represents a 32% increase over the R$ 718 billion that were transferred from the Union Budget for the same purpose, associated with financial parasitism. Unfortunately, this seems to be the priority on the government's economic agenda. No limits, cuts, or contingency measures on this item of spending.

The chart below clearly shows the sharp increase in financial expenses during the first half of Lula's third term. To use an expression favored by the President, never before in the history of this country has the federal government incurred such a large volume of expenses for debt interest payments.

The amount allocated for the payment of financial expenses within the Union Budget has been significant year after year. According to information gathered and released by the National Treasury Secretariat (STN), the series began to be compiled in 1997. Thus, over these 28 years, until the end of the 2024 fiscal year, the federal government allocated a total of R$ 10,5 trillion for the payment of public debt interest. For those who are sincerely concerned about "excessive spending" or the "quality of public spending," this should be the object of analysis and criticism. But the scribes in the pay of finance prefer to forget this phenomenon.

Strict fiscal austerity doesn't affect interest rates.

These figures dismantle the false argument regarding the causes of the supposed structural imbalance in the budget accounts. The voices that always defend the interests of finance – and even sectors entrenched in the high state technocracy – always seek to blame social spending categories as the main culprits for the fiscal deficit. To this end, they cling as best they can to the methodology of "primary accounts," which has been used for a prolonged period since the 1980s as the official technique for calculating the fiscal result for our country.

Thus, the problem lies in the tautological circularity inherent in the adopted model. Since the definition of the concept of "primary" means the exclusion of financial accounts for the purpose of calculating the consolidated result between revenues and expenses, the concrete fact is that the monstrous volume of payments for interest on public debt is left out of the accounting. In this way, the opportunistic discourse of finance and conservative forces ends up focusing on the most significant accounts of a social nature, that is, the so-called primary accounts. And this has been the case for a long time: the bombardment against expenses on health, social assistance, education, social security, public servant salaries, public safety, and others.

One of the most dramatic aspects of this process is the crushing of budgetary capacity in these areas of a social nature, opening space for an increasing privatization of the provision of such public services. As a result, we observe a growing participation of private capital in hospitals, health plans, management of social health organizations, primary and secondary schools, colleges and universities, private security companies, paid social assistance services, and others.

Government prides itself on "fiscal robustness"

Despite widespread criticism in society regarding the continuation of the austerity model proposed by Fernando Haddad, the government continues to embrace conservatism in economic policy. In fact, President Lula himself has repeatedly let slip a misguided view of the dynamics of the economy, attempting to equate the management of public finances with household or family budgets. The most recent manifestation of this occurred in... press conference held on January 30thLula told reporters, "When he once again stated that everything he knows about economics he learned from his mother, Dina Lindu:"

(...) “I learned stability from Dona Lindu - that's how I govern this country. You can't spend more than you're able to collect” (...)

Also, in the Message sent to the National Congress To mark the opening of the 2025 legislative year, the government makes extensive mention of its commitment to austerity. So much so that the document received, for the first time, a chapter dedicated exclusively to the topic, with the significant title of "Commitment to Fiscal Robustness." Madness! And among the numerous positive references to fiscal austerity, the following can be highlighted in the text: (...)

"In 2024, the Federal Government maintained its commitment to balancing public accounts. We did the..." sixth largest fiscal adjustment in the world and the third largest among emerging countries, according to the International Monetary Fund (IMF). The primary deficit is estimated at 0,1%, the lowest in the decade. In 2025, we will continue to base our management on... commitment to fiscal balanceThis is expressed in the Budget Guidelines Law (LDO), as well as in the set of fiscal measures sent to the National Congress in November 2024, which will allow save R$ 70 billion in 2025 and 2026.” (...) [GN]

Despite all this self-praise, which directly contradicts any perspective of a progressive government focused on a development project, there is no mention of the symbolic mark of one trillion reais for fulfilling obligations to holders of public debt bonds. Perhaps the real reason for this significant oversight lies in the fact that this figure embarrasses the Workers' Party and all political groups, entities, and sectors that are betting on a process of effective change in the direction of the third term.

Time is rapidly advancing, and as Lula himself has expressed, 2026 has already begun. Opinion polls point to a risky drop in the President's and his government's popularity. It is urgent to make decisions to reorient the course of economic policy. Insisting on high interest rates and drastic budget cuts does not seem to be the best way to prepare for a contest that promises to be fierce.