Brazil posts slightly wider-than-expected February budget deficit

BRASILIA (Reuters) -Brazil's central government recorded a slightly wider-than-expected primary budget deficit in February, Treasury data showed on Thursday, although the result improved sharply from a year earlier, mainly due to lower expenditures.

Latin America's largest economy posted a deficit, excluding interest payments, of 31.673 billion reais ($5.52 billion) for the month, while economists polled by Reuters had expected a 30.4 billion reais shortfall.

In February last year, the primary deficit stood at 58.267 billion reais.

The annual improvement was primarily driven by a 12.6% real drop in total expenditures, translating into savings of 25.2 billion reais. It was also supported by a 3.1% real increase in revenues, adding 4.4 billion reais to public coffers.

Over the 12-month period, the central government's primary deficit stood at 13.2 billion reais, or 0.09% of gross domestic product, complying with the government's annual fiscal target of zero deficit, which allows for a tolerance margin of 0.25% of GDP in either direction.

Brazil's Treasury Secretary Rogerio Ceron said the government's stance was to be as restrictive as possible in the first half of the year to support monetary policy, as the central bank aggressively raises interest rates to cool the economy and curb inflation.

Speaking at a press conference, Ceron noted that spending limitations due to last year's failure to approve the 2025 budget played a role in the lower fiscal deficit recorded in the first two months of the year.

Typically, the annual budget law for a given year is approved at the end of the previous year, but this time it was only passed last week. As a result, the government decided to cap its monthly expenditures at one-eighteenth of the total budgeted for the year.

Year-to-date, the central government posted a primary surplus of 53.184 billion reais, far exceeding the 21.195 billion reais recorded in the same period of 2024.

According to the government, the sharp decline in February spending was mainly influenced by a different schedule for federal court-ordered payments. In the same month last year, disbursements under this category were substantial, whereas this was not the case this year.

($1 = 5.7351 reais)

(Reporting by Marcela Ayres, Editing by Louise Heavens and Alison Williams)