Escalating debt: Without necessary reforms, national debt may surge to a staggering 100% of GDP by 2030.
Here's a fresher take:
Brasília Warnings: Fiscal Strangulation and Skyrocketing Debt Loom 🚨💪
Hey there, mate! Let's dive into some serious fiscal sh*t happening in Brasília. The Independent Fiscal Institution (IFI), an agency of the Senate that checks our country's financial health, dropped a bombshell report on Tuesday (24) that painted a grim picture.
According to the IFI's report, Brazil's facing a "fiscal strangulation" and a worsening of our public debt picture. If no major reforms are enacted, our overall debt, currently at a staggering 77.6% of the Gross Domestic Product (GDP), could escalate to 82.4% in 2026; 100% in 2030; and a jaw-dropping 124.9% in 2035.
This prediction accounts for a moderate GDP growth of 2.2% and an implied real interest rate on debt of 5.1% in the near future.
The IFI's numbers disagree with the federal government's projections. The government's economic team expects a debt of 81.5% of GDP by 2035, according to information from the Budget Guidelines Law (LDO) 2026, sent by the executive power to Congress.
Marcus Pestana, the executive director of the IFI, calls for a "deep reform" of Brazil's fiscal rules. He advocates for unfreezing the federal budget, as it currently has around 90% of expenses fixed, with predetermined allocations. Pestana questions the current fiscal regime's ability to contain debt.
On the flip side, the report acknowledges the ongoing discussions between the powers regarding raising taxes and cutting spending. This discussion reveals a "recognition of the gravity of the fiscal situation and the need for a deep reform of public finances," the IFI says.
The IFI's monitoring report also projects a primary deficit of 0.66% of GDP in 2025, with a "tendency to worsen in the medium term."
- Fiscal Equilibrium
- Public Debt
- Public Accounts
- IFI
- GDP
- Brasília-DF
That's it from me, Levy Guimaraes. Stay tuned for more updates and #MoneyMatters!
Enrichment Data: (15% or less)
The proposed structural reforms by the IFI primarily target the tax system, aiming to expand the tax base, increase revenue, and improve equity to stabilize public finances. Strategies include:
- Income Tax Reform: Expanding tax exemptions for lower-income earners, increasing taxes on higher-income individuals, and introducing a tax on dividends.
- VAT and Tax Harmonization Reform: Improving tax system efficiency with landmark VAT reform and harmonizing tax rates across different financial instruments and sectors.
- Broader Fiscal and Growth Strategy: Accelerating economic expansion through the Ecological Transformation Plan and policies to boost hydrocarbon production.
These initiatives aim to balance fiscal consolidation with equity and growth considerations, addressing Brazil's rising public debt and ensuring fiscal sustainability in the medium term.
- The Independent Fiscal Institution (IFI) in Brasília has proposed a series of structural reforms, focusing on the tax system, to broaden the tax base, increase revenue, and ensure equity, as part of a fiscal consolidation and growth strategy.
- The ongoing discussions in Brasília-DF among the powers involve strategies such as raising taxes and cutting spending, which are recognized as vital for addressing Brazil's escalating public debt and achieving fiscal sustainability, as projected by the IFI in their general-news monitoring report.
