Brazil's Finance Minister Dario Durigan has pushed back against criticism that federal spending is the central cause of the country's fiscal pressure, arguing instead that high interest rates are placing direct strain on public debt. The account is based on single-source reporting from Revista Oeste, which cited Durigan's interview with g1.
Durigan, who leads the economic team under President Luiz Inácio Lula da Silva, said the Finance Ministry should not be treated as the main cause of Brazil's current interest-rate levels. Revista Oeste reported that he described the link between government spending and high rates as an overly simple answer to a complex problem.
"I am not looking for culprits," Durigan said, according to Revista Oeste's account of the g1 interview.
Debt and Rates
Brazil's public debt reached 81.1% of gross domestic product in May, its highest level in five years, according to figures cited in the report. Since Lula began his third presidential term, the federal debt stock has risen by 9.4 percentage points of GDP.
The debate matters because Brazil's Central Bank uses high interest rates to contain inflation, while fiscal policy can either reinforce or weaken that effort. If investors believe the government will keep spending faster than revenue grows, they can demand higher returns to hold public debt, which in turn raises the cost of financing the state.
Durigan's argument places more weight on the second part of that cycle: the cost of debt service. In that view, elevated rates themselves become a fiscal burden, making it harder for the government to stabilize debt even if it seeks to control spending.
Spending Dispute
Economists and market analysts cited by Revista Oeste rejected that framing. They argued that Brazil's budget imbalance is pushing rates higher, not the other way around, and said fiscal expansion from the Planalto Palace, the seat of Brazil's executive branch, works against the Central Bank's anti-inflation policy.
The report said total federal spending reached R$2.633 trillion over the 12 months through May, roughly USD 530 billion at recent rates, an approximate conversion. That total is approaching the historical peak recorded in November 2020, when emergency pandemic-era outlays helped push spending to R$2.822 trillion.
Revista Oeste also reported that rising social-benefit and pension costs forced an emergency freeze of R$23.7 billion in ministerial funds, roughly USD 4.8 billion at recent rates. In Brazil, such freezes are used when the government needs to comply with fiscal rules or avoid a wider budget shortfall.
May Deficit
Brazil's consolidated public sector, which includes the federal government, states, municipalities and state-owned companies, posted a primary deficit of R$56.1 billion in May, according to Central Bank data cited by the report. A primary deficit measures the gap between revenue and non-interest spending, excluding the cost of servicing public debt.
That May result was worse than the R$33.7 billion deficit recorded in the same month a year earlier. The federal government accounted for most of the shortfall, with a negative balance of R$55.2 billion.
States and municipalities also posted a combined deficit of R$1.2 billion in May, while state-owned companies recorded a monthly surplus of R$273 million. From January through May, however, public companies accumulated a consolidated loss of R$7.4 billion, according to the figures cited by Revista Oeste.
The dispute leaves Brazil's fiscal debate centered on cause and effect. Durigan points to high borrowing costs as a major obstacle for the treasury. Critics cited in the report say the borrowing costs reflect the government's own spending path.