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What is the Federal Public Debt?

The Federal Public Debt (FPD) is the debt incurred by the National Treasury to finance the Federal Government budget deficit, included the refinancing of its own debt, and to carry out operations with specific purposes defined by law.

The FPD can be classified in many ways, mainly: i) by the currency in which cash flows are represented; and ii) by the instruments used for the indebtedness;

Related to the currency in which the cash flows appear, the FPD can be classified into domestic or external debt. When the flows are made in domestic currency, in the case of Brazil the Real (BRL), the debt is called Domestic Federal Public Domestic Debt (DFPD). When the flows occur in foreign currency, usually in US dollar (USD), the debt is classified as External Federal Public Debt (EFPD).

With regard to the instruments used for the indebtedness, the FPD can be classified as either contractual or securitized (bonded) debt. In the first case, debt arises from a contract, which defines its characteristics. In the second, debt results from a security (bond) issued by the Federal Government through public offer (auctions, book building or syndicated operations) or direct issuances to specific holders. The contractual debt is usually made with multilateral organizations, such as World Bank and Interamerican Development Bank, with government agencies (e. g. Japan Bank For International Cooperation and KfW), and private banks.

Nowadays, the total amount of the Federal Public Debt in the national market is paid in BRL and captured by the public bonds issuance. Contractual debt under the National Treasury refers exclusively to external debt, since the domestic contractual debt has been securitized over the years and is therefore classified as part of the domestic debt.

For more information about the concepts and ways to classify the Federal Public Debt, consult the book Public Debt: The Brazilian Experience, part 1, chapter 4.