Brazil's public sector debt rises in October, despite primary surplus

BRASILIA, Nov 29 (Reuters) -

Brazil's gross public sector debt rose to 78.6% of gross domestic product (GDP) in October from 78.2% in September, central bank data showed on Friday, resuming an upward trend despite a primary budget surplus for the month.

The increase was primarily attributed to interest payments, which totaled 111.6 billion reais ($18.8 billion) in October, amid heavy losses from foreign exchange swap operations, alongside a higher debt stock and elevated borrowing costs.

The country's benchmark interest rate currently stands at 11.25%, with policymakers signaling further hikes ahead amid a challenging inflation outlook as economic activity remains solid and fiscal concerns weigh on the Brazilian currency.

The public sector posted a primary surplus of 36.9 billion reais ($6.1 billion) for the month, below the 40 billion reais expected by economists in a Reuters poll.

The result was led by the central government, which posted a 39.2 billion reais surplus, in line with Treasury Secretary Rogerio Ceron's

earlier forecast

.

Ceron noted that the result keeps the government on track to meet its fiscal target of a zero deficit for the year, with a margin of 0.25% of GDP on either side.

On a 12-month basis, the public sector recorded a primary deficit of 1.95% of GDP, while the central government's primary deficit stood at 2.0% of GDP.

The Finance Ministry expects a significant improvement in the fiscal trajectory during the year's final months as large deficits from late 2023, affected by extraordinary court-ordered payments, fall out of the rolling 12-month calculation.

($1 = 6.0031 reais) (Reporting by Marcela Ayres; editing by Gabriel Araujo)