Brazil Posts Widest Primary Budget Deficit of the Year in May

Brazil posted its widest budget deficit before interest payments of the year last month as slower growth erodes tax collection.

The so-called primary deficit was 6.9 billion reais ($2.2 billion) in May, the central bank said in a report Tuesday. The median estimate of 21 economists surveyed by Bloomberg was for a primary deficit of 7 billion reais following a surplus of 13.4 billion reais the prior month.

The primary gap as a percentage of gross domestic product over 12 months narrowed to 0.68 percent -- compared with a government’s goal of posting a surplus equal to 1.1 percent this year.

Finance Minister Joaquim Levy is raising taxes and cutting spending to reach that target, which is key to showing whether public debt is sustainable in Brazil. His efforts are designed to boost investor confidence and stave off a sovereign-credit downgrade after Moody’s Investors Service last year lowered its outlook on Brazil to negative.

The real strengthened 0.7 percent to 3.0961 per U.S. dollar at 10:40 a.m. local time.

Brazil also posted a nominal budget deficit of $59.8 billion reais in May compared with a surplus of 11.2 billion reais a month earlier. The median estimate of four analysts surveyed by Bloomberg was for a 55.3 billion-real deficit last month.