Brazil primary budget surplus up

BRASILIA: Brazil's primary surplus rose in July in line with expectations as public sector debt shrank in proportion to gross domestic product, the central bank said on Friday.

Brazil posted a July consolidated primary budget surplus, which includes federal and regional governments and state companies, of 13.8 billion raised ($8.57 billion).

The government had been expected to post a primary surplus of 13.8 billion reads, according to the median forecast of analysts surveyed by Reuters. Estimates for a surplus ranged from 9.6 to 14.7 billion reads.

Analysts look at a country's primary budget surplus as a gauge of its ability to service its debt.

Brazil's total public sector debt was equivalent to 39.4 percent of GDP in the month, down from 39.8 percent in June.

Brazil's government ramped up spending last year ahead of October presidential elections.

President Dilma Rousseff, who took office in January, now faces inflation climbing to six-year highs, above a government target range, and her administration has promised to cut $30 billion from the budget to cool price pressures.

In the 12 months through July, the primary surplus was equivalent to 3.83 percent of gross domestic product, up from a previously reported 3.54 percent through June.

Despite the improving public accounts, Rousseff still faces stubbornly high inflation, which climbed to 7.1 percent in the 12 months through mid-August for the first time since 2005.

The central bank has raised interest rates five times so far this year, to 12.5 percent, the highest rate among major economies.

Higher rates push up debt servicing costs, and in July pushed the nominal budget deficit to 5.0 billion raised. The deficit was 5.6 billion raised the previous month.

Copyright Reuters, 2011