Brazil Budget Deficit Narrows Less Than Expected

The Brazilian government posted a nominal budget deficit of BRL 97.6 billion in July 2026, narrowing from BRL 175.6 billion in the same month a year earlier and exceeding market expectations of a BRL 84 billion shortfall. The federal government recorded a BRL 11 billion surplus, while regional governments posted a BRL 8.5 billion deficit and state-owned companies registered a BRL 1.1 billion shortfall. Meanwhile, gross government debt rose to 82.5% of GDP in July, the highest level since October 2021, up from 81.9% in the previous month and above market forecasts of 82.2%. Over the 12 months through July, the nominal public sector deficit narrowed to 0.67% of GDP from 1.19% in the previous month.

The Brazilian government posted a nominal budget deficit of BRL 166 billion in June 2026, widening from BRL 108.1 billion in the same month a year earlier and exceeding market expectations of a BRL 133.2 billion shortfall. The federal government recorded a BRL 47.2 billion deficit, while regional governments posted a BRL 6.6 billion deficit and state-owned companies registered a BRL 5.5 billion shortfall. Meanwhile, gross government debt rose to 81.9% of GDP in June, the highest level since October 2021, up from 81.1% in the previous month and above market forecasts of 81.5%. Over the 12 months through July, the nominal public sector deficit widened to 1.19% of GDP from 1.14% in the previous month.

The Brazilian government posted a nominal budget deficit of BRL 163.7 billion in May of 2026, widening from the BRL 125.9 billion in the corresponding period of the previous year. The result was higher than expectations of a BRL 148.3 billion, the sharpest on record for the month. The deficit of the federal government rose to BRL 55.2 billion in the year. Despite the wider budget shortfall, the deficit remained relatively stable as a shar of the Brazilian GDP at 9.6%. The higher level of public spending was aligned with common patterns in election years in the country. The Brazilian central bank has hinted that elevated deficit spending by the central government, especially direct cash welfare transfers, is among the main culprits of stubborn inflationary pressures. Brazil has among the highest real interest rates in the world.