Despite the turmoil in the economy, the Federal Public Debt (DPF) remains tenable, said Otávio Ladeira, acting secretary of the National Treasury on Monday (Jan. 25). According to him, the worse debt profile is temporary and, the share of treasury bonds adjusted by the benchmark interest rate (SELIC) will drop again from 2018.

Last year, the DPF rose 21.7% ($121.45 billion) and ended 2015 at $681.19 billion. The growth occurred because the Treasury issued more bonds than redeemed, and because last year's high interest rates boosted by adding interest on the public debt, which is when the Treasury gradually recognizes the interest to be paid to investors.

In addition to the stock growth, the DPF composition has worsened. The equity securities adjusted by the Selic rate increased from 18.7% to 22.8%. For 2016, the Annual Financing Plan (PAF) forecasts that the share of these securities is expected to rise between 30% and 34%. Bonds adjusted to benchmark interest rates are not favorable to the Treasury because they raise the risk of public debt in high interest rate cycles, as the current one.

According to Ladeira, the Treasury expects the share of Federal Public Debt ajusted by Selic rate to rise by 2019. He, however, points out that even with the rise, the indicator will remain at lower rates than those reached until 2005 on the worst hypothesis, or until 2011 on the most optimistic hypothesis. "This is a short-term variation driven by the economic complex scenario, but the rates are still better than those of previous years," he declared.

About the debt sustainability, the secretary reiterated that the Treasury is prepared to face instability in public debt management. He mentioned the liquidity cushion—reserves to reach the maturity of domestic public debt in case the government is not able to sell any public bond—is equivalent to six months of maturity, which totals around $61 billion.

In addition, Ladeira noted that the share of bonds maturing in the next 12 months should end the year at the lowest rate in history.

The acting secretary has also mentioned that the increased number of bonds emitted by the Treasury has helped the Central Bank to reduce the sale of securities purchased under agreements, which are used to decrease the amount of money circulating in the economy.

"Every R$1 billion of bonds the Treasury adds to the market, the Central Bank reduces R$1 billion in repurchase operations," explained Ladeira. And he noted that "Although the Federal Public Debt is an important part, it is not the government debt total."