“Government solvency is at risk,” says Affonso Celso Pastore


Former president of the Central Bank, economist Affonso Celso Pastore considers that the strong concentration of maturities of National Treasury bonds in early 2021 is a “very serious” problem in public debt management.

To Estadão, Pastore says that President Jair Bolsonaro, senators and deputies have made “deaf ears” to fiscal risks to the economy.

What is happening in the debt market?

The government’s perception of solvency risk has worsened enormously. Last year, gross debt closed at 78% of GDP. It will close this year close to 100%. The primary deficit will be 15% of GDP and the government will put an additional 15% of debt. And the Treasury has to roll over all the debt that is falling due. As the solvency risk has increased, the market demands a very high premium to buy the papers. The longer, the higher the risk. In order not to further increase the cost and worsen the dynamics of the debt, the Treasury is opting to exchange for securities with shorter maturities, further reducing the average maturity.

But is the market demanding more and more prizes?

The market is demanding premiums because the government’s risk of insolvency has grown. If he had been placing long-term bonds, he would be raising the average cost of debt. The option he made was to shorten the average debt term. The average term has already been shortening since the country lost its investment grade. We have already had times when the debt was rolled over overnight (very short-term financial investments). There in Greek calendars, for many years. Only that debt was 30%, 40%. Not 100%.

Why don’t members of the government and Congress believe what’s going on?

We try to explain, I try, everybody tries. But they insist on not understanding. They make deaf ears. I’m not talking about the Treasury, the BC. Those know. I am talking about senators, deputies and the President of the Republic, who absolutely do not understand the problem.

Is there a lack of a communication strategy to overcome this crisis?

In addition to the communication strategy, there is a lack of an economic strategy that Minister Paulo Guedes has not yet explained.

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