Gross public debt remains stable in March, but 12-month interest expenses soar.
The escalating burden of interest payments has not been accompanied by an increase in the debt-to-GDP ratio.
SAO PAULO (Reuters) - The country's gross debt remained stable in March as a proportion of GDP, even with a deficit in the public sector accounts for the month, data from the Central Bank showed on Friday, which also pointed to a surge in government interest expenses over 12 months.
Public sector interest payments reached 65,3 billion reais in March, representing 6,85% of GDP -- 693,6 billion reais -- over 12 months, compared to 4,46% in the same period last year. This marks the highest percentage of GDP recorded in the central bank's series since June 2017.
The escalating burden of interest payments has not been accompanied by an increase in the debt-to-GDP ratio -- which stood at 77,4% of GDP a year ago and closed March at 73%, the same level as February -- partly due to net redemptions of government bonds during the year, with the National Treasury opting to reduce issuances during a period of uncertainty, and mainly due to nominal GDP growth, which is gaining strength with inflation.
The government of President Luiz Inácio Lula da Silva has consistently called for a reduction in basic interest rates, but the Central Bank remains cautious about inflationary dynamics and has maintained its benchmark interest rates at their highest level in six years, at 13,75%, since September.
In March, the consolidated public sector recorded a primary deficit of 14,182 billion reais, higher than the expectation of economists consulted in a Reuters poll, who predicted a negative balance of 9,028 billion reais.
The central government had a deficit of 9,712 billion reais, while states and municipalities registered a negative primary balance of 4,625 billion reais, and state-owned companies had a surplus of 154 million reais, according to data from the Central Bank.
Net debt reached 57,2%, down from 56,6% in February.