* Worst fiscal result in more than a decade
* Overall budget gap doubles to 6.7 percent in 2014
* Minister says numbers are “honest” (Adds comment by cabinet minister)
By Silvio Cascione and Luciana Otoni
BRASILIA, Jan 30 (Reuters) - Brazil fell far short of its main fiscal target in 2014, underscoring the uphill battle that President Dilma Rousseff faces to shore up public accounts to prevent a credit downgrade as recession risks loom.
Brazil posted a primary budget deficit of 32.536 billion reais ($13.76 billion) for last year, equal to 0.63 percent of gross domestic product, the central bank said on Friday. That was the first annual gap since the current data series started in 2001 and a far cry from the 91.3 billion reais surplus of 2013.
The country’s overall budget gap, which takes into account debt servicing costs, doubled in 2014 to 6.7 percent of GDP, one of the highest among major economies according to the International Monetary Fund.
The results, much worse than the already grim estimates of investors and ratings agencies, mean that newly appointed Finance Minister Joaquim Levy will have to slash spending or continue jacking up taxes to meet the government’s goal of saving 1.2 percent of GDP in 2015.
Budget constraints are just one headache for Rousseff, who struggled to win re-election in October. State-run oil company Petroleo Brasileiro SA is engulfed in a massive corruption probe, and some of the country’s biggest cities risk rationing water.
Brazil needs to run solid budget surpluses to service its sizable debt, on which it pays double-digit interest rates. Gross debt will probably keep rising this year, to 65.2 percent of GDP, according to central bank estimates.
Brazil’s currency, the real, dropped nearly 3 percent on Friday, while interest rate futures <0#2DIJ:> spiked.
On condition of anonymity, a cabinet minister acknowledged the figures were “very bad,” but said they reflected the true state of Brazil’s finances.
The December results are the last under former Finance Minister Guido Mantega and Treasury Secretary Arno Augustin. Both left office at the end of the year after investors accused them of using “creative accounting” to bolster budget results.
“We can have a true start from 2015 onwards,” the minister told Reuters. “The plan was that there should be no skeletons in the closet for Levy.”
The Rousseff administration originally aimed for a primary surplus equivalent to 1.9 percent of GDP in 2014. It later abandoned that target as tax revenues dwindled and public spending surged ahead of the October election. (Additional reporting by Anthony Boadle; Editing by Todd Benson, Chizu Nomiyama and Lisa Von Ahn)