(Adds size of fiscal shortfall)
By Lisandra Paraguassu
BRASILIA, Oct 22 (Reuters) - Brazil has given up on its goal of seeking a primary budget surplus this year and instead will record a massive shortfall as a deepening economic and political crisis drags on revenues, presidential chief of staff Jaques Wagner said on Thursday.
President Dilma Rousseff was forced to drop plans to reach a fiscal surplus and instead is projecting a deficit of at least 50 billion reais ($12.74 billion) as tax revenues have plummeted and the government is struggling with efforts to raise extra income, Wagner said.
That projected deficit could be even wider if the government decides to include up to 35 billion reais in arrears it owes state-run banks, two government officials told Reuters.
Wagner acknowledged that the projected deficit does not include those arrears.
In July, the government cut this year's primary surplus goal to 8.7 billion reais, or 0.15 percent of gross domestic product, from 66.3 billion reais, the equivalent of 1.1 percent of GDP, in its original budget.
The new fiscal goal has to be approved by Congress.
The outlook for a record deficit highlights just how difficult it will be for Rousseff to shore up government accounts and regain the confidence of investors backing away from the slumping economy.
The government is considering including in the deficit the arrears it owes to state-run lenders, but there is no decision on whether the repayment should be immediate or gradual, said the two officials, who declined to be named because the discussions are not public.
The country's Federal Accounts Court ruled on Oct. 7 that Rousseff manipulated the budget last year by delaying payments to those banks that advanced money to pay for social programs.
The ruling has emboldened Rousseff's opposition, which is calling for her impeachment for breaching the fiscal responsibility law.
Brazil's fiscal woes have triggered a slew of rating downgrades that threaten to further sink an economy heading for what many experts expect to be its longest recession since the 1930s.
Rousseff has stood by a targeted primary surplus of 0.7 percent of GDP next year, but many economists doubt she will be able to hit that target either, as a rebellious Congress blocks her unpopular austerity plans.
Even if the government scores a surplus next year the accounts remain far from being balanced. Brazil's overall budget deficit has ballooned to more than 9 percent of GDP.
$1 = 3.93 Brazilian reais Additional reporting and writing by Alonso Soto; Editing by Tom Brown and James Dalgleish