July 28, 2017 / 2:26 PM / a year ago

UPDATE 1-Brazil posts record budget deficit for June

(Adds details, background)

By Marcela Ayres

BRASILIA, July 28 (Reuters) - Brazil posted another large budget deficit in June, the biggest on record for the month, highlighting the government’s uphill battle to meet its budget target amid a slow economic recovery.

The monthly deficit before interest rate payments narrowed in June to 19.552 billion reais ($6.21 billion) from 30.7 billion in May. The deficit was slightly larger than market forecasts for a gap of 19.25 billion reais in a Reuters poll.

The deficit in the 12 months through June reached 167.2 billion reais, equivalent to 2.62 percent of gross domestic product and well above the official target for a deficit of 143.1 billion reais for this year.

Policymakers have frozen about 45 billion reais in federal spending and raised taxes on fuel as they scramble to meet the budget target. Brazil lost its investment-grade rating in 2015 after missing fiscal goals for years.

Fiscal discipline has started to disrupt services such as passport services, raising concerns about the feasibility of President Michel Temer’s austerity agenda. Just 5 percent of Brazilians approve of his administration.

Intent on avoiding disruptions to air traffic control and police patrols, Planning Minister Dyogo Oliveira on Thursday announced the government would shift 2.2 billion reais ($700 million) from investments to essential services.

The government has publicly reiterated it will take all necessary measures to meet the target, despite growing media speculation about a potential change.

$1 = 3.1483 reais Reporting by Marcela Ayres; Writing by Silvio Cascione; Editing by Bernadette Baum

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