Abstract

The paper presents a decomposition of the net interest paid by the Brazilian
government, in 2002-2021, dividing the expenditure in four parts: the real-interest-rate
cost, the inflation cost, the carry cost of fixed-income assets and exchange-rate swaps.
The analysis also details the carry cost in terms of the government’s main financial assets:
(international reserves and loans to the BNDES), showing that the financial adjustment of
2016-2021 reduced the equilibrium primary balance in around 2.5% of GDP.

JEL Classification: E62; H60; N16.