Vol. 15 No. 2 (1995)
How to Cite
The payment of the internal public debt
Abstract
This paper proposes a change in public debt policy, based on the placement
of new bonds with maturities between l and 30 years. By modifying the conditions of a
similar proposal presented by Giambiagi and Zini, it is shown that if all the internal public
debt were transformed into a debt of 7 years, paid through a monthly fix payment, with
an interest rate of 12% in US$ and a clause for payment in foreign currency, the primary
surplus of the Federal Government required for internal public debt service and payments
of interest on external public debt could, under certain conditions, be less than 2.5% of
GDP. Afterwards, some parameters are changed in order to present a menu of alternatives,
which imply a more rapid payment and require a higher primary surplus in the first year. It
is concluded that, with a fiscal effort of around 2.0% of GDP related to the data of 1993,
Brazil could adopt a stabilization plan with a fiscal and monetary toughness very similar to
that of the Convertibility Plan adopted in Argentina in 1991.
JEL Classification: H63.
Keywords: Public debt stabilization fiscal adjust