ABSTRACT
This article analyses the evolution of the Brazilian public sector’s deficit and of its sources of financing from 1983 to ·1988. It is shown that the government’s growing financial problems arose, to a certain extent, from a sharp reduction in its primary surplus from 1985 on. But this was partly compensated by a substantially lower interest burden. As a result, there was no explosive increase in the operational deficit up to 1988. The public sector’s increasing financial difficulties resulted basically from a significant narrowing of the supply of credit, a process that began with the external debt crisis and that was reinforced by the effects of accelerating inflation combined with increasing doubts concerning the government’s creditworthiness.
KEYWORDS:
Deficit; public sector funding