The trajectory of Brazilian public debt, which went from 71.7% of the Gross Domestic Product (GDP) in 2022 to around 82.9% of GDP in August 2026, has been highlighted by the financial market and by economists considered “liberal” or “orthodox” as the “biggest problem” of the next government that would put the Brazilian economy at risk. For this wing, reducing spending is the main way to maintain fiscal balance.
On the other hand, there are economists from other schools of thought, considered “heterodox” or “developmentalist”, who point out this financial market proposal as harmful to the population because it takes away resources from fundamental areas, such as health, education, social security and social assistance.
For these experts, the high interest rates charged by the Central Bank (BC) are the country's main economic problem that puts pressure on public debt. The BC has conditioned the reduction in interest rates to the achievement of primary surpluses by the Union, which is when revenues exceed expenses, excluding debt expenses.
Forbes magazine, a finance specialist based in the United States (USA), published an article suggesting a cut of up to R$450 billion to stabilize Brazilian public debt, based on studies by the Independent Fiscal Institute (IFI), linked to the Senate.
During the presidential campaign, the promise of a smaller cut, of R$250 billion, was attributed to candidate Flávio Bolsonaro (PL) based on press revelations. The proposal was attacked by candidate Luiz Inácio Lula da Silva (PT) who accused Flávio of preparing a “treasury” in social benefits.
Consulted by Agência Brasil, economists rejected the dominant thesis published in the press that the trajectory of Brazilian debt must be combatted by cutting primary spending, that is, those used to provide public services.
Default and inflation
Professor at the Unicamp Institute of Economics Simone Deos states that there is no risk of debt default or an increase in inflation, as liberal economists warn, due to the increase in gross debt in recent years.
"This has no major consequences because the public debt is in reais, not in foreign currency. History does not show any country that has not been able to pay its internal debt, in national currency, due to lack of resources. There would be a risk if the debt was in dollars", he says.
Fernando Henrique Lemos Rodrigues, professor of economics at the Federal Rural University of Rio de Janeiro (UFRRJ), told Agência Brasil that the debt is not yet a concern as liberal economists have warned.
"Debt as a proportion of GDP is not a priority concern. The debt is within international parameters considering the complexity of Brazil and the weight of internal debt. These are still acceptable levels, even with the growth of recent years", he states.
The doctor in economic theory also criticizes the comparison, common in economic news, of the Brazilian State with a family by arguing that the government cannot spend more than it collects.
"We are not talking about a housewife, nor a bakery owner. We are talking about a country with the capacity to collect revenue, to extend its debt and to obtain revenue from its state-owned companies", explained Fernando.
International comparison
Researcher Simone Deos, who works at the Center for the Study of International Economic Relations (CERI) at Unicamp, adds that many countries have debt levels higher than or similar to Brazil.
Japan (236% of GDP), the United States (120% of GDP), the United Kingdom (101% of GDP), Italy (135%), India (81.2%) and Canada (110% of GDP) are countries that record public debts greater than or similar to that of Brazil, according to data from the International Monetary Fund (IMF) from 2024.
For Simone, the problem with the increase in debt is because a larger portion of the public budget is committed to paying interest to the richest.
"What is causing this upward trajectory is interest payments. And its problem is that an increasing portion of GDP is being transferred to rentiers [people or companies that obtain income through financial investments]", he adds.
Interest puts pressure on debt
The real interest rate in Brazil of 8.45%, the highest in the world according to a survey by consultancy Moneyou, is the main factor for the growth of public debt, according to data from the Central Bank (BC).
In the last 12 months, Brazil spent R$1.1 trillion on interest, which represents 8.86% of GDP, calculates the BC. Throughout 2026, the main factor for the 4.2 percentage point (pp) growth in debt/GDP was nominal interest.
Professor Fernando Henrique argues that the pressure to reduce public spending in Brazil is “blackmail” by the financial market with the aim of keeping interest rates high. This is because the BC has conditioned the reduction in interest rates on primary surpluses.
According to the professor, as the government cannot make the fiscal adjustment that the market demands without reducing the population's social rights, the pressure for cuts works to justify maintaining high interest rates.
"The market knows that the government will not cut. There is a collusion to keep the interest rate high. A financial investment fund has around 90% of its profitability coming from public debt", explained Rodrigues.
The UFRRJ professor argues that Brazil has inflation “fairly controlled”, with there being room for a greater reduction in interest rates.
“It turns out that the Brazilian BC is hostage, above all, to the financial institutions with the greatest firepower, large banks and large brokerages, which are the people at Faria Lima”, he explained.
Another reason given for reducing interest rates in Brazil is the fact that interest rates are low in developed countries, which creates pressure from the financial market to keep interest rates high in countries such as Brazil, Mexico, Russia, Turkey and Indonesia.
The Central Bank justifies the high interest rates, among other reasons, due to inflationary pressures and primary fiscal deficits in public accounts. According to the monetary authority, primary spending above revenue puts pressure on inflation.
Alternative to fiscal adjustment
Unicamp professor Simone Deos considers, on the other hand, that a debate on the efficiency and quality of public spending is valid, but argues that changes cannot harm social policies.
The CIRE researcher argues that the economic doctrine adopted by the BC has not worked for Brazil. “The BC’s playbook has to change for it to act differently.”
According to the expert, it is possible to reduce interest rates in Brazil and, therefore, balance public debt in a coordinated and planned way through intervention in the foreign exchange market, one of the main factors of inflation in Brazil. To do this, the BC would have to make use of US$350 billion in dollar reserves.
"A reduction in interest rates is more than enough for the debt to stabilize. To do this, coordinated action is needed with the BC's exchange rate issue. Furthermore, we have to discuss the quality of spending", he commented.
UFRRJ professor Fernando Henrique Rodrigues, in turn, argues that the State needs to strengthen its social budget and investments in state-owned companies to pursue some economic development.
"If public spending, initially, has what would be considered a negative impact on public accounts, in a second moment, it generates income, employment and new investments. This comes back in the form of revenue", he commented.
