(Adds results of Telecom auction, analyst and Moody's comments)
By Alonso Soto
BRASILIA, Sept 30 (Reuters) - Brazil posted its fourth straight monthly primary budget deficit in August, making it nearly impossible for President Dilma Rousseff's administration to achieve a key fiscal target this year as spending picks up before next month's elections.
The consolidated public sector primary deficit reached 14.460 billion reais ($5.89 billion) in August, the biggest for that month since at least 2001 and a far wider gap than the 5.1 billion reais expected by the market, central bank data showed on Tuesday.
A sharp deterioration of Brazil's finances under Rousseff has put the once-booming economy in the sights of rating agencies and eroded investor confidence in the country.
The government has only fulfilled 10 percent of its 2014 primary surplus target in the first eight months of the year. That means the administration has four months to save 88 billion reais, or 1.7 percent of gross domestic product, to reach its goal.
"The government's fiscal policy is completely out of sync. You can't keep spending so much money while your income slows," said Alex Agostini, chief economist with Austin Rating in Sao Paulo.
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.
Brazil's finances have turned into a hot campaign topic ahead of Sunday's presidential vote. Rousseff's two main rivals accuse her of relaxing the tough fiscal rules that helped the economy stabilize after years of crisis.
Rousseff, who is leading the polls ahead of the Oct. 5 vote and a likely second round run-off on Oct. 26, has in recent weeks promised a series of tax benefits and additional government spending that would put extra strain on the country's accounts.
To make things worse, the government raised much less than expected in an auction of fourth-generation (4G) cell spectrum on Tuesday. Bids in the auction totaled 5.85 billion reais ($2.39 billion), less than the 8 billion reais that officials said they hoped to raise.
Billions of reais in such extraordinary revenues have propped up Brazil's finances over the last three years as public spending continues to surge.
The public sector's overall budget deficit, which includes interest payments, rose to 155 billion reais or the equivalent to 4.62 percent of GDP between January and August - the highest gap for that period in at least 13 years.
Central bank data also showed that the widening budget gap pushed the country's net debt to more than two-year highs.
Rampant spending remains the weakest link in Brazil's credit-rating profile, a senior analyst at Moody's Investors Service said on Tuesday. Moody's has threatened to cut Brazil's debt rating in the next couple of years because of the large fiscal and current account imbalances that the next administration will face.
Stagnant tax revenue caused by a sluggish economy has compelled Rousseff to tap 3.5 billion reais from a sovereign wealth fund and seek 1.5 billion reais in dividends from state-owned companies to meet the government's target.
Many economists say those transfers are examples of the "creative" accounting methods that Rousseff has used over the last three years and that have hurt investor confidence in Brazil's fiscal discipline.
$1 = 2.4575 Brazilian reais Reporting by Alonso Soto; Additional reporting by Luciana Otoni, Brad Haynes and Guillermo Parra-Bernal; Editing by W Simon and Stewve Orlofsky