By Marcela Ayres

BRASILIA (Reuters) – Brazil’s gross debt rose less than expected in 2024, supported by the central bank’s sale of foreign reserves in December. This month was characterized by intense exchange rate volatility amid fiscal concerns, as shown by official data released on Friday.

A key indicator of fiscal solvency, the gross debt-to-GDP ratio decreased to 76.1% in December from 77.7% in November, while economists polled by Reuters had anticipated a closing year figure of 77.0%.

The annual debt increase amounted to 2.2 percentage points, as reported by the central bank, primarily driven by heavy interest payments.

In December, the central bank conducted massive foreign exchange interventions, including spot dollar sales and dollar repurchase agreements totaling over $30 billion, amid a sharp weakening of the Brazilian real.

However, about a third of the gross debt reduction from these operations is expected to reverse when the central bank eventually buys back the dollars sold in auctions with repurchase agreements, remarked Renato Baldini, deputy head of the bank’s statistics department.

The Brazilian currency fell to as low as 6.30 per U.S. dollar in December, a month usually marked by outflows from company profit remittances, further weighed down by investor concerns following the government’s disappointing late-November spending cut package.

On Friday, the currency was trading around 5.81 reais per dollar.

Central bank data also indicated that the public sector posted a primary surplus of 15.745 billion reais ($2.71 billion) in December, surpassing the expected 10.2 billion reais surplus from a Reuters poll.

The central government’s primary surplus reached 26.728 billion reais in December, reducing the annual deficit to 45.364 billion reais, or 0.38% of GDP, a significant improvement from the 2.42% deficit of 2023.

The Treasury announced that the annual result met the fiscal target of a zero primary deficit, with a tolerance margin of 0.25% above or below. The 2024 shortfall stands at 0.09% of GDP after excluding specific expenses for compliance, such as costs from unprecedented flooding in Rio Grande do Sul.

($1 = 5.8167 reais)