Brazil's STF to decide public debt correction indices

The Brazilian Supreme Federal Court (STF) is set to decide which monetary correction and interest indices should be applied to public treasury debts during the period prior to the issuance of a court-ordered payment (precatório) or a small value requisition (RPV).

The ruling follows Constitutional Amendment 136/2025, which updated the rules for updating public debts. Under the new system, once a requisition is issued, values are corrected by the IPCA-E index plus interest based on savings account rates, unless the Selic rate is higher. However, the amendment did not specify which index to use during the phase when the debt is still being calculated and defined by the judiciary.

The case involves a specific dispute regarding indemnity for unused leave due to a public school teacher in São Paulo. The Court of Justice of São Paulo (TJ-SP) had previously ruled that the Selic rate should continue to be used as the sole index for both correction and interest, even after the new amendment took effect.