This is the worst figure since April 2021, when it reached 10.25% following the COVID-19 pandemic.

Brazil's overall public sector deficit exceeded 10 percent of gross domestic product (GDP) in the 12 months through July, central bank data showed on Friday, highlighting the fiscal challenges facing Latin America's largest economy.

Pressured by a ballooning interest bill and rising public spending, the country's total 12-month deficit reached 1.13 trillion reais ($195.48 billion) in July, equivalent to 10.02% of GDP.

This is the worst figure since April 2021, when it reached 10.25% following the COVID-19 pandemic.

The overall deficit in July alone was 101.4 billion reais, well above the 78.6 billion reais deficit expected in a Reuters poll of economists.

The primary deficit, which excludes interest payments, reached 21.3 billion reais in the month, also exceeding the 5 billion expected in the survey.

The result was driven by a primary deficit of R$11 billion from states and municipalities, while the central government recorded a negative result of R$8.6 billion and state-owned companies posted a deficit of R$1.7 billion.

The interest bill, meanwhile, amounted to R$80.1 billion in July, affected by the growth of the debt stock and associated costs, amid a reference interest rate currently at 10.50%.

Brazil's public debt as a share of GDP, considered a key indicator of solvency, rose to 78.5% in July from 77.8% the previous month, mainly due to higher interest payments, according to the central bank.

So far this year, gross debt has already increased by 4.1 percentage points.