Brazil's public sector gross debt falls in October to lowest since pandemic

BRASILIA, Nov 30 (Reuters) - Brazil's government debt as a share of gross domestic product (GDP) fell in October, mainly affected by nominal growth in economic activity, central bank data showed on Wednesday.

The country's gross debt dropped to 76.8% of GDP in October, from 77.1% in September. That was the lowest since the 75.3% recorded in February 2020, before the country spent record sums to combat the COVID-19 pandemic.

According to the central bank, the reduction was mainly due to a nominal rise in GDP, which is driven by the strength of activity and also influenced by inflation.

The drop was also helped by net debt redemptions, as the Treasury kept its strategy in October of using its liquidity reserve to reduce bond issues as Brazil's benchmark interest rate remained at a cycle-high.

Year-to-date, Brazilian gross debt has fallen by 3.5 percentage points, the central bank said. The Economy Ministry recently forecast it would end the year at 74.3% of GDP, the lowest since 2018.

The Treasury has argued Brazil's fiscal performance is impressive, given the IMF predicts emerging countries should see their gross debt rise, on average, by 10.6 points this year from 2019.

In October, the Brazilian public sector posted a primary surplus of 27.095 billion reais, above the 26.1 billion reais surplus expected by economists polled by Reuters.

The result was due to the primary surplus of the central government, which reached 30.2 billion reais in the month, helped by revenues that again surprised on the upside.

States and municipalities recorded a 3.9 billion reais deficit for the month, and state-owned companies posted a 711 million reais surplus. (Reporting by Marcela Ayres; Editing by Steven Grattan and Mark Potter)