Durigan says interest, not spending, raises public debt

The finance minister, Dario Durigan, declared that the increase in Brazil's debt is not due to higher spending, but to the elevated interest rates affecting the country. According to his assessment, pressure on the debt stems from the government's need to honor old commitments, using bonds as a payment instrument.

Interest as engine of debt expansion

When the interest rate remains high, the financing cost of existing debt rises. Each new interest payment adds an extra amount to the outstanding balance, which over time raises the total public debt. This dynamic explains why, even without expanding current spending, debt can grow significantly.

Paying old debts with bonds

The government has resorted to issuing bonds to settle obligations previously assumed. This practice, although common in public finance, requires the payment of interest on the issued bonds. When interest rates are high, the amount needed to roll over old debt becomes even larger, feeding the debt-increase cycle.

Implications for fiscal policy

By identifying interest as the main factor driving debt expansion, the minister highlights the importance of policies aimed at lowering the interest rate or restructuring existing debt. Such measures can reduce the burden of financial charges and help contain debt growth over time.

In short, Dario Durigan's statement reinforces the idea that controlling interest rates and effectively managing past obligations are essential to stabilizing public debt, regardless of the volume of new spending.

With information from Agência Brasil.