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By Alonso Soto
BRASILIA, April 29 (Reuters) - Sinking tax revenues drove up Brazil’s budget deficit, excluding interest rates, amid a deep recession, complicating efforts to restore fiscal stability as a likely change of government looms.
Central bank data showed on Friday the country posted a primary budget deficit of 10.644 billion reais ($3.09 billion) in March.
In the 12 months through March, the primary budget deficit rose to an equivalent of 2.28 percent of gross domestic product from 2.11 percent in the 12 months through February.
Vice President Michel Temer who will replace President Dilma Rousseff in coming weeks if, as widely expected, the Senate soon puts her on trial, has said rebalancing the fiscal accounts will be one of his government’s biggest challenges.
Brazil is expected to record its third straight annual primary deficit in 2016 after years of surpluses. The primary surplus, or excess revenue prior to interest payments, is a key gauge of a country’s capacity to repay its debt.
A recession entering its second year and past fiscal mismanagement has raised fears among investors that Brazil will be unable to repay its debt in coming years. All major rating agencies have stripped Brazil of its coveted investment grade.
Brazil’s overall budget deficit, including interest payments, narrowed to 9.995 billion reais from a massive shortfall of 52.827 billion reais the previous month. In March, the central bank recorded a profit from the sale of currency swaps, derivatives that provide protection against losses in the real, as the local currency firmed in March.
$1 = 3.4423 Brazilian reais Reporting by Alonso Soto and Marcela Ayres; Editing by Chizu Nomiyama