What is the difference between the government's total revenue and expenditure, including interest on the public debt?
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The nominal deficit represents the difference between the government's total revenue and expenditure, including interest on the public debt. Over the past five months, Brazil has faced successive significant nominal deficits, surpassing the 10% mark of Gross Domestic Product (GDP) in July 2024. This significant increase is the result of a combination of high public spending, including debt interest expenses, and revenue growth below what is needed to offset these expenses.
This scenario of high nominal deficit reflects a continuous fiscal imbalance. When the government spends more than it collects and needs to finance its spending with debt, the interest on this debt ends up increasing the nominal deficit. The increase in interest also directly affects debt service, that is, the amount that the government needs to disburse just to meet its financial obligations.
Over the past five months, the persistent nominal deficit has put pressure on the debt/GDP ratio, increasing the perception of fiscal risk and hindering the government's efforts to stabilize public accounts. The direct impact on GDP is worrying, as it affects the country's ability to maintain investments and implement public policies without resorting to increasing debt. The government has sought measures to contain spending, but the increase in expenditure, combined with a still unstable economic scenario, has made it difficult to control this indicator.
In short, the high nominal deficit places Brazil in a delicate situation, with the urgent need to adjust its public accounts to avoid a deeper impact on economic growth and debt sustainability.
