...the wurst is yet to come
I was going to write a post today on the dismal situation of Brazil’s national debt, which rose sharply in 2015 to R$2.79 trillion. Moreover, the composition of the debt changed markedly with a greater-than-anticipated increase in SELIC-based issues thus making the debt more interest rate sensitive. (Other government issues are based on the Price Index or the discount at the spot sales price.)
However, I preferred to wait until the administration announces its “fiscal adjustment” program this week. I can then put the debt in perspective and analyze it and the program in context.
It is sufficient for the time being to show the numbers in the first paragraph, above for you to understand the vulnerabilities associated with the increase in the debt level and the increased sensitivity of the debt to increases in the interest rate.
The program to be announced will indicate the likely policy path of the administration for at least a couple of quarters and within which we can anticipate the effects on the debt level.
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