Brazil's Central Government Posts July Primary Surplus of $2.1 Billion

Brazil's central government recorded a primary surplus of 10.8 billion reais ($2.1 billion) in July, according to Treasury data released on Thursday. The result slightly exceeded the 10.7 billion reais expected by economists.

The surplus was largely driven by a calendar effect tied to court-ordered payments. The government under President Luiz Inacio Lula da Silva concentrated most of these disbursements in March this year, compared with July last year. These payments, which arise from final court rulings against the federal government, have long weighed on public finances.

Because of the shift in the payment schedule, July expenditures fell 20.7% in real terms from a year earlier, a decline of 56.4 billion reais. At the same time, net revenue rose 7.7%, or 16.1 billion reais, supported by strong tax collection and higher oil royalty receipts amid rising crude prices linked to tensions in the Middle East.

Despite the monthly surplus, the central government posted a primary deficit of 81.3 billion reais in the year through July, up 12.4% in real terms from the same period last year. Over a rolling 12-month period, the deficit reached 0.55% of gross domestic product.

The government's fiscal target for this year is a primary surplus of 0.25% of GDP, with a tolerance band of 0.25 percentage point in either direction. Under Brazil's fiscal framework, certain expenditures—notably part of the large stock of court-ordered payments—can be excluded when assessing compliance with the target.