(Recast, adds debt data and context)
BRASILIA, Feb 27 (Reuters) - Brazil recorded a bigger-than-expected primary budget surplus in January, central bank data showed on Friday, in the first sign that the government’s belt-tightening drive was starting to improve its troubled finances.
Brazil posted a primary budget surplus of 21.063 billion reais ($7.35 billion) in January, above analysts’ expectations for a surplus of 18.250 billion reais.
The country also posted an overall budget surplus of 3.041 billion reais in January, its first positive figure in two years.
President Dilma Rousseff has started to raise taxes and cut expenditure to regain the trust of investors worried with the financial deterioration of the once-booming economy.
The leftist leader, now in her second term, issued a decree on Friday to reduce dozens of tax breaks granted to businesses in a failed attempt to restart the economy in recent years.
States were responsible for nearly half of January’s belt-tightening, posting a 9.215 billion reais surplus as many local governments scrambled to raise taxes and freeze billions of reais in services and infrastructure projects.
In the 12 months through January, the primary budget balance was a deficit equivalent to 0.61 percent of Brazil’s gross domestic product. The government’s goal is to save the equivalent of 1.2 percent of GDP in 2015.
The primary balance, or savings before debt payments, is closely watched by investors and serves as a gauge of the country’s capacity to repay its debt.
The country’s public gross debt was 64.4 percent of GDP, up from 63.5 percent in December.
$1 = 2.87 Brazilian reais Reporting by Luciana Otoni; Editing by Bernadette Baum