Public Borrowing Binge

Brazil's public debt levels rose consistently in 2009, reflecting the growing financing requirements of the Brazilian government's ambitious fiscal stimulus efforts at a time of subdued revenue levels. Brazil's public debt pile stood at BRL1,504.9bn, some 7.0% of GDP. This marks an 8.7% year-on-year (y-o-y) increase in the public debt stock. We believe that the increase in public borrowing has been in large part facilitated by the ability of the authorities to tap domestic credit markets, in turn, enabling the government to initiate a rapid and decisive fiscal response to the recession in 2009. Indeed, internal public debt accounts for some 93% of total debt, up substantially from 76% back in 2000. Internal public debt was up 11.8% y-o-y in November, while the external debt stock fell by 21.5%.

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