By Jamie McGeever
BRASILIA, Sept 30 (Reuters) - Brazil’s national debt rose to the highest on record in August, central bank figures showed on Monday, driven by a combination of increased interest payments, higher borrowing and a weaker exchange rate.
Brazil’s total gross debt incorporating the central government, states, municipalities and the social security system rose to 79.8% of gross domestic product from 79.0% the month before, the central bank said.
That is the highest since comparable data records began in 2006 and highlights the challenge the government faces in restoring the public finances to health, which it says is a prerequisite for reviving confidence, investment and growth.
According to the central bank, nominal interest rates added 0.5 percentage points to debt/GDP ratio, the real’s depreciation in the month accounted for 0.4 percentage points and net debt issuance added 0.1 percentage point. Stronger economic growth subtracted 0.3 percentage points.
The real weakened 8% against the dollar in August, its biggest monthly fall in four years, and benchmark 10-year Brazilian bond yields posted their biggest monthly increase since August last year.
Brazil’s nominal budget deficit last month was 63.64 billion reais ($15.3 billion), bringing the accumulated deficit over the preceding 12 months to 444.7 billion reais, or 6.32% of GDP, the central bank said.
The government’s primary fiscal deficit before interest rate payments are taken into account, was 13.45 billion reais ($3.2 billion), less than the 16.69 billion reais deficit economists had expected.
For the 12 months to August, the primary deficit totaled 95.508 billion reais, equivalent to 1.36% GDP. The government’s target for the calendar year is a deficit of 132 billion reais, which would be the sixth consecutive annual shortfall.
Last week, the Treasury said spending freezes and cuts are putting the government on track to beat its fiscal targets for the year.
$1 = 4.1650 reais Reporting by Marcela Ayres and Jamie McGeever; Editing by Cynthia Osterman