✅ July public sector fiscal data came worse than consensus, with a notable negative surprise in the nominal result. The nominal deficit reached BRL 175.6 billion, above the market expectation of BRL 132.1 billion. Similarly, the primary result posted a deficit of BRL 66.6 billion, versus a consensus of BRL 60.6 billion. This outcome was composed of deficits in the Central Government (–BRL 56.4 bn), regional governments (–BRL 8.1 bn), and state-owned companies (–BRL 2.1 bn).
✅ The main cause of the surprise was high nominal interest expenses, totaling BRL 109.0 billion in the month. A detailed analysis shows that the turnaround in the Central Bank’s foreign exchange swap operations explains most of the surprise. After a gain of BRL 31.9 billion in June, the operations generated a loss of BRL 12.4 billion in July under the accrual method. This month-to-month deterioration of BRL 44.3 billion roughly matches the BRL 43.5 billion nominal result surprise.
✅ This fiscal performance led to higher public debt. The Public Sector Net Debt (PSND) rose 0.8 percentage points in the month, reaching 63.7% of GDP, above the 63.4% projection. The increase was driven by interest (+0.9 p.p.) and the primary deficit (+0.5 p.p.). The General Government Gross Debt (GGGD) also increased, reaching 77.6% of GDP.
✅ On a 12-month basis, the accumulated primary result turned into a deficit of BRL 27.3 billion (-0.22% of GDP), reversing the surplus observed until June. Accordingly, the accumulated nominal deficit over the same period reached BRL 968.5 billion, equivalent to 7.86% of GDP.
