Brazil meets 2025 fiscal target after deductions, despite wider headline deficit

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Central government posted primary deficit of 0.48% of GDP

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Fiscal result deteriorated year-on-year

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Primary surpluses of 0.5%-1% of GDP needed to stabilize debt

(Adds comments from Treasury secretary in paragraphs 10-14)

By Marcela Ayres

BRASILIA, Jan 29 (Reuters) - Brazil's central government reported a wider primary deficit in 2025 compared with the previous year but still met its fiscal target thanks ?to legally allowed exclusions, Treasury data showed on Thursday.

The exclusions, largely related to a portion of the government's annual court-ordered payments, prevent ?a significant volume of expenditure from being counted for compliance purposes.

The central government ended 2025 with ?a primary deficit of 61.7 billion reais ($11.88 billion), equivalent to 0.48% of gross ?domestic product, a real ?increase of 32.3% from the previous year's shortfall.

But the government was able to exclude 48.7 billion reais from the fiscal-target calculation.

After those ?deductions, the primary result was a deficit of 13 ?billion reais, or 0.1% of GDP - within the target of a balanced result for the year, which allows a tolerance band of 0.25% of GDP on ?either side.

Still, it is the full, undiscounted result ?that matters ?for pressure on the public accounts, adding to the rise in the debt.

In December alone, the government posted a primary surplus of 22.1 billion reais, down 12% in real ?terms from the same month in 2024.

Latin America's largest economy carries a heavy debt load compared with its emerging-market peers, with borrowing costs pushing it higher.

FISCAL UNCERTAINTIES

President Luiz Inacio Lula da Silva's government approved in 2023 a new fiscal framework setting a cap on real spending growth alongside primary balance targets, but later loosened the initial goals for 2025 and 2026.

It sought a zero primary deficit ?last year ?and aims for a primary surplus of 0.25% of GDP this year, instead of the more ambitious surpluses of 0.5% in 2025 and 1% in 2026.

Treasury Secretary Rogerio ?Ceron said the framework has played an important role in improving control of public finances, saying total expenditure - including exceptions - stands at 18.8% of GDP, not materially different from levels under more fiscally conservative governments in the past.

Ceron, speaking at a press conference, said a faster adjustment could come, for example, from lowering the current 2.5% ceiling on real spending growth.

He added that once Brazil begins to deliver primary surpluses between 0.5% and 1% of ?GDP, it will be close to the level needed to stabilize the gross debt-to-GDP ratio.

Earlier this month, the Treasury estimated that this indicator, a key gauge of the sustainability of public finances, will increase by 11.9 percentage points over Lula's ?current term, which ends this year.

($1 = 5.1937 reais) (Reporting by Marcela Ayres; editing by Gabriel Araujo and Jane Merriman)