In a scenario where no policy changes are made, there is a 53% chance that the debt-to-GDP ratio will surpass 100% within ten years, with a 61% probability of crossing this threshold at any point during that period. The baseline assumptions include a real interest rate of 5%, average GDP growth of 2.4%, and a primary surplus of 0.5% of GDP. Brazil’s gross debt currently stands at 76.1% of GDP.

Under a scenario involving diluted reforms, the probability of debt exceeding 100% within a decade still reaches 25%, rising to 32% when considering the possibility of it happening at any point in the next ten years. This projection assumes that, starting in 2027, the government achieves an average primary surplus of 1.5% of GDP through a set of measures: delinking healthcare and education spending from GDP growth and adjusting them only for inflation; indexing pensions and other social benefits to inflation plus half of real GDP growth; cutting wage bonuses to half the minimum wage; reducing legal tax exemptions by 10%—which the Finance Ministry estimates at over R$800 billion—and trimming parliamentary budget earmarks by 10%, from R$50.4 billion in 2025.

The study’s conclusions diverge sharply from the outlook of Dario Durigan, the Executive Secretary at the Finance Ministry. Speaking at a Brazilian Development Bank (BNDES) event earlier this month, Mr. Durigan said it was possible to resolve Brazil’s debt challenge within five years “through spending controls and fiscal rebuilding.” He acknowledged that returning to primary surpluses at the current Selic interest rate level is “neither viable nor feasible,” but suggested there was room for interest rate cuts “soon.”

The analysis by economists Alexandre Teixeira, Renan Martins, and political consultant Ricardo Ribeiro uses stochastic modeling, which employs historical averages and standard deviations of key variables to generate thousands of possible debt trajectories.

“The advantage of this method is that it produces not just a single forecast but a wide range of possible outcomes, allowing us to gauge the likelihood of specific events,” said Mr. Teixeira.

The diluted reform scenario was designed as a softer version of a much stricter package that has been circulating among market economists in recent months. The harsher version, however, is widely seen as politically unfeasible, given strong opposition from President Luiz Inácio Lula da Silva and powerful congressional lobbies. It includes eliminating real increases for pensions and social benefits, tightening eligibility for welfare programs such as the BPC, ending the wage bonus, making deeper cuts to tax expenditures, and slashing parliamentary amendments to the average level seen between 2020 and 2024.

According to MCM’s estimates, such a strict package could generate an average primary surplus of approximately 3% of GDP over ten years. “With this level of fiscal adjustment, it’s not hard to show the debt could be stabilized,” Mr. Teixeira noted.

Other institutions have reached similar conclusions. A recent World Bank study estimated the effort needed to stabilize Brazil’s debt trajectory at 3% of GDP. The Independent Fiscal Institution (IFI) calculated the required primary surplus at 2.4%.

A tougher fiscal adjustment could lead to a 3% primary surplus within a decade, MCM says

The study also tested a third scenario, using the same parameters as the diluted reform case but with two adjustments: it assumes the reforms enhance fiscal credibility, lowering the real interest rate to 4.5%—the same level recorded between 2016 and 2019 after the approval of Brazil’s spending cap—and reducing interest rate volatility by halving its standard deviation.

In this case, the probability of debt exceeding 100% of GDP virtually disappears. “The key takeaway is that investors need to view the reform as sufficient. For any reform to be effective, it must clearly signal debt stabilization,” Mr. Teixeira said. “A reform that is too lenient may not achieve this goal.”

Other institutions, such as IFI, have also published stochastic scenarios, though typically based on their baseline cases. In its latest Fiscal Monitoring Report, IFI estimated a 72.7% chance of gross debt surpassing 90% of GDP by 2029.

In the annexes to the 2026 Budget Guidelines Bill (PLDO), the government indicated that the likelihood of debt exceeding 100% of GDP is low and only materializes in an “adverse scenario” involving a 100 basis point Selic rate shock starting in September 2025.

The Finance Ministry, through its press office, said Mr. Durigan’s comments reflect the baseline scenario prepared by the National Treasury’s technical team, which assumes compliance with the fiscal targets set in the new framework. Under this scenario, debt peaks at 84% of GDP in 2029 before declining gradually. This aligns with the Treasury’s latest Fiscal Projections Report, which forecasts a debt peak of 84.3% of GDP in 2028.

The ministry added that its projections “rely on parameters consistent with current macroeconomic conditions and reaffirm the economic team’s commitment to gradual, responsible, and sustainable fiscal consolidation.”

A recent report by Warren Investimentos did not assign probabilities but outlined three potential scenarios. Not even the baseline scenario—which includes indexing the minimum wage to inflation from 2027 and freezing public sector wages until 2030—was able to stabilize debt by 2035. Only in the “adjustment scenario” does gross debt decline after peaking at 92% of GDP in 2029. In this case, the primary surplus would reach 1.7% of GDP by 2030 and 2.0% by 2035.