Brazil’s Fiscal Reckoning: Record R$1 Trillion Interest Payments Expose Lula’s Spending Spree
By Hotspotnews
Under President Luiz Inácio Lula da Silva’s leadership, Brazil has crossed a dangerous financial threshold: interest payments on the public debt reached an unprecedented R$1 trillion in 2025—the highest nominal amount in the nation’s history. This colossal sum, equivalent to roughly 8% of GDP, represents a direct transfer of taxpayer money to bondholders and creditors rather than investments in essential services like education, healthcare, security, or infrastructure that could benefit ordinary Brazilians.
This alarming milestone is no accident. It is the direct consequence of expansive fiscal policies that have prioritized unchecked government spending over responsibility. The current administration has driven up expenditures through expanded social programs, relaxed fiscal constraints under the new framework that supplanted the stricter spending cap, and repeated measures that have undermined market confidence. Persistent primary deficits—where government outlays exceed revenues even before accounting for interest—have forced ever-greater borrowing. With the Central Bank’s Selic rate held at elevated levels around 15% to combat inflation pressures exacerbated by loose policy, the cost of servicing this mounting debt has skyrocketed.
The contrast with the prior administration under Jair Bolsonaro could not be starker. During Bolsonaro’s term, particularly beyond the exceptional pandemic period, interest expenses as a share of GDP declined notably in several years, approaching lower levels thanks to disciplined spending controls, adherence to fiscal rules like the spending ceiling, and a focus on macroeconomic stability that helped keep borrowing costs in check. Debt dynamics showed meaningful improvement in non-crisis periods, proving that prudent governance can rein in the interest burden even amid inherited high debt.
Yet today, the picture is one of deterioration. Brazil’s gross public debt surged to 78.7% of GDP by the close of 2025—equivalent to R$10 trillion—with the trajectory pointing upward. The nominal deficit, encompassing those punishing interest costs, exceeded R$1 trillion annually, locking the economy into a self-reinforcing cycle: excessive spending begets more borrowing, which fuels higher rates to safeguard the currency and tame inflation, which in turn inflates the interest bill and crowds out productive public and private investment.
This is textbook fiscal irresponsibility. When leaders treat the public purse as an endless resource for populist initiatives and political patronage, the consequences fall hardest on working families through future tax hikes, stifled economic growth, diminished opportunities, and reduced fiscal room for genuine crises. The R$1 trillion paid in interest represents a massive “dízimo fiscal”—a tithe extracted from Brazilians to reward rentiers rather than build the nation’s future.
Genuine conservative principles offer the only viable path forward: strict spending restraint, consistent primary surpluses, structural reforms to shrink the oversized state, and credible fiscal rules that restore investor trust. Brazil demonstrated elements of this approach in the recent past and achieved tangible results. Reviving that discipline—through decisive cuts to discretionary outlays, efficiency gains, and a renewed commitment to sound money—is essential to break free from the debt trap. Without it, every Brazilian will continue bearing the heavy cost of policies that favor short-term political expediency over enduring national strength and prosperity.