The vote on Brazil’s 2025 budget (likely next week) will put renewed attention on whether the primary deficit will be kept low enough to comply with the government’s fiscal rules. But the key point is that Brazil’s weak public debt dynamics owe more to high real interest rates than to a small primary deficit. And there’s no sign of the credible commitment to fiscal tightening needed to bring down high borrowing costs and arrest the rise in the public debt ratio.
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