(Recasts with record deficit and context)
BRASILIA, April 28 (Reuters) - Brazil posted a record primary budget deficit for March, central bank data showed on Friday, showing the challenges the government faces to rebalance public accounts amid a sluggish economic recovery.
The public sector’s primary deficit of 11.047 billion reais ($3.45 billion) in March was larger than market forecasts for a shortfall of 10.5 billion reais. In February, the primary deficit of 23.5 billion reais was also a record for that month, which usually sees less tax revenue for seasonal reasons.
A deficit of 11.686 billion reais in the central government, which includes ministries, pensions and the central bank, explained the public sector’s record gap.
Much of the deficit is due to rising pension expenditures while tax income continues to disappoint as economic activity remains weak after two years of recession.
In the 12 months through March, the primary deficit remained stable at 2.34 percent of the gross domestic product.
The overall budget deficit, which includes debt interest payments, rose to 54.349 billion reais, up slightly from the 54.244 billion reais in February. ($1 = 3.2025 reais) (Reporting by Marcela Ayres; Writing by Alonso Soto; Editing by Bernadette Baum and Frances Kerry)