(Recast, adds data details and context)
BRASILIA, Nov 28 (Reuters) - Brazil posted its smallest primary budget surplus ever for the month of October, raising the risk that the country could record its first annual gap in less than two decades.
Brazil had a primary surplus of 3.729 billion reais ($1.46 billion) in October, central bank data showed on Friday, breaking a string of five straight monthly deficits and above market expectations for a surplus of 3.5 billion reais.
The rapid deterioration of the public accounts under President Dilma Rousseff has added pressure to already high inflation and hurt investors’ confidence in the once-booming economy.
Worries over Brazil’s financial health cost the country a downgrade this year and threatens its coveted investment credit grade.
To stanch the fiscal bleeding and rebuild bridges with investors, Rousseff picked fiscal hawk Joaquim Levy as her next finance minister.
Levy, a banker and former treasury secretary, has vowed to cut spending and aim for more moderate fiscal goals in coming years.
In the first 10 months of the year, the primary balance showed a deficit of 11.557 billion reais.
The government originally aimed for a primary surplus, which represents the public sector’s excess revenue over expenditures before debt payments, of 99 billion reais or the equivalent of 1.9 percent of gross domestic product for full-year 2014.
The government now seeks a surplus of just 10 billion reais.
The country posted a primary deficit of 25.491 billion reais in September.
$1 = 2.5457 Brazilian reais Reporting by Alonso Soto; Editing by Chizu Nomiyama