Domestic public bond’s debt: an alternative

Vol. 13 No. 2 (1993)

Apr-Jun / 1993
Published April 1, 1993
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Giamiagi, Fabio, and Álvaro Antônio Zini Jr. 1993. “Domestic Public bond’s Debt: An Alternative”. Brazilian Journal of Political Economy 13 (2):171-95.

Domestic public bond’s debt: an alternative

Fabio Giamiagi
Da Faculdade de Economia e Administração da Universidade Federal do Rio de Janeiro – UFRJ, Rio de Janeiro/RJ, Brasil. Do Banco Nacional de Desenvolvimento.
Álvaro Antônio Zini Jr.
Do Instituto de Matemática e Estatística da Universidade de São Paulo – IME-USP, São Paulo/SP, Brasil.
Brazilian Journal of Political Economy, Vol. 13 No. 2 (1993), Apr-Jun / 1993, Pages 171-195


This article develops arguments in favor of recomposing the time to maturity
of the domestic public bond’s debt and present calculations on the amount of tax required by different terms of payment of that debt, assuming that it is rescheduled. Two alternatives
are presented and evaluated. Alternative one offers a collateral for the principal owed and
calculates the flow of interest in relation to GDP during the repayment period, Alternative
two is based on making gradual and small down-payments to repay the old debt within a
new institutional framework. The interest rate in the two cases would fluctuate and be readjusted
each semester. Both alternatives yield a substantial alleviation of the interest burden
compared to the present policy. The main conclusion is that with a dollar long-term interest
rate similar to the ones observed in the international markets (about 8% a year) plus 2% of
country risk and a 3% a year GDP growth rate, the domestic public debt could be paid in 20
years if a yearly provision of only 0.7% of GDP is allocated to its payment. The calculations
also show that the required primary budget surplus would decrease to the range of 2.l% to
2.7% of GDP, facilitating the balancing of the budget.

JEL Classification: H63; E31.

Keywords: Public debt stabilization