Public debt exceeds government target and falls to 89.7% of GDP in 2025

Public debt, from a Maastricht perspective, the one that counts towards European budgetary rules, exceeded the Government’s target and fell to 89.7% of GDP in 2025, according to the Bank of Portugal (BdP) bulletin released on Monday. In the forecasts contained in the State Budget report for 2026 (OE2026), the Portuguese Ministry of Finance expected to close the year with a ratio of 90.2% of GDP, i.e. 0.5 percentage points higher.

“Considering the estimate of gross domestic product (GDP) for 2025, public debt stood at 89.7% of GDP at the end of the year, which corresponds to a reduction of 3.9 percentage points compared to the figure recorded at the end of 2024” of 93.6% of GDP, according to the BdP.

The downward trend is mainly explained by economic growth, i.e. the positive evolution of GDP, since, in absolute terms, public debt grew by €3.9 billion at the end of last year to a total of €274.8 billion, compared to the same period in 2024.

The central bank, led by Álvaro Santos Pereira, explains that this development reflects, in particular, “the increase in savings certificates”, which grew by €5.4 billion, “and long-term debt securities”, which increased by €4 billion.

“Conversely, loans fell by €3.5 billion. This decrease was mainly due to repayments of €2.5 billion to the European Financial Stabilisation Mechanism (EFSM) and €1.5 billion to the European Financial Stability Facility (EFSF). In addition, treasury certificates decreased by €2.0 billion”, according to the Bank of Portugal.

Considering only the month of December 2025, public debt, from a Maastricht perspective, decreased by €6.6 billion. This development reflects the decrease in loans (-€4.1 billion), mainly due to repayments to the MEEF and the EFSF, as well as the reduction in debt securities (-€2.2 billion), particularly long-term instruments.

On 30 December, the Portuguese Treasury and Government Debt Agency (IGCP) repurchased €886 million in debt securities maturing in 2026 and 2027 on the market. This repayment is in addition to the repurchase carried out on the 17th and the early repayment to the MEEF on 22 December, totalling around €4.5 billion in public debt.

“The continued reduction in government debt stems from the country’s good economic and budgetary situation, resulting from the merit of households and businesses in creating wealth”, the Ministry of Finance said in a statement at the time.

In November, the Ministry of Finance reiterated that “the Government maintains its forecast of a reduction in public debt to 90.2% of GDP by the end of 2025, after ending 2024 at 93.6% of GDP”. It is now known that the ratio exceeded the Government’s target, standing at 89.7% of GDP, i.e. five tenths less.

The positive evolution of public debt corresponds to a 3.9 percentage point decrease in the debt-to-GDP ratio in a single year.