Brazil’s Public Sector Finances

Brazil’s net public sector and, to a lesser extent, gross GG debt has declined in recent years. The risk profile of the debt has also improved markedly in terms of susceptibility to financial markets shocks. However, by the standards of the more advanced emerging markets, gross government financing requirements remain significant and the maturity of the domestic debt stock is of relatively short duration. Thus Brazil needs to accelerate the reduction in the public debt ratio, including the stock of domestic debt, in order to reduce interest rates. This will ultimately require both shorter-term fiscal adjustment and longer-term structural reforms.