By Jamie McGeever
BRASILIA (Reuters) – Brazil’s Treasury on Friday raised the public debt ceiling for this year to account for a surge in emergency spending to combat the COVID-19 crisis, outgoings that will increasingly be covered by short-term borrowing.
The total stock of federal debt is now expected to end the year between 4.6 trillion and 4.9 trillion reais, the treasury said in a statement, up from the previous parameters of between 4.5 and 4.75 trillion reais.
“The inevitable increase in the government’s financing needs … represents the main impact for (federal public debt) in a year marked by the COVID-19 pandemic and its effects on the Brazilian economy,” the statement said.
“The (annual) financing strategy, therefore, has been adjusted to accommodate a higher volume of issuance, leading to a higher limit for the overall debt stock,” it said.
Figures released on Friday showed Brazil’s stock of federal public debt fell 1% in July to 4.34 trillion reais ($80 billion) from the month before, while the domestic debt stock fell 0.8% to 4.12 trillion reais.
In its revised financing plan, the treasury said the share of short-term debt maturing in the next 12 months will be increased to between 24% and 28% of the total from 20-23%, reflecting the jump in short-term borrowing triggered by the economic crisis and associated market volatility.
Treasury said much of that increase in short-term borrowing will be in fixed rate debt, the share of which will rise to between 30% and 34% of the total from 27% to 31%.
On Thursday, official approval was granted for the central bank to transfer 325 billion reais to the treasury to help pay down the record debt load and ease the increasing funding strain.
($1 = 5.41 reais)
(Reporting by Jamie McGeever; Editing by Chris Reese and Tom Brown)
