May 18, 2016 / 3:43 PM / 2 years ago

UPDATE 1-Brazil's new gov't sees primary deficit hitting 160 bln reais - source

(Adds further comments and detail, background)

By Rodrigo Viga

RIO DE JANEIRO, May 18 (Reuters) - Brazil’s new interim government estimates that its primary budget deficit could hit 160 billion reais ($45 billion) this year, including losses from state electricity holding Eletrobras, a source with knowledge of the situation told Reuters on Wednesday.

Planning Minister Romero Juca was set to meet on Wednesday afternoon with members of the Congressional budget committee and with Senate President Renan Calheiros to discuss increasing the deficit target for the year, the source said.

Unless a new deficit target is approved by Congress, the government will have to impose drastic spending cuts next month. The previous government of suspended President Dilma Rousseff set a public sector deficit target of 96 billion reais ($27.17 billion).

Juca told journalists on Wednesday at an event in Rio de Janeiro that the new fiscal target would be announced next week. He confirmed that it would likely include renegotiated debts from individual states and losses by Eletrobras.

The country’s new energy minister, Fernando Coelho Filho, said that Eletrobras’ dire situation needed attention. He said the government was considering selling off the company’s assets.

Finance Minister Henrique Meirelles told newspaper Folha de S.Paulo in an interview published on Wednesday that the government will have to consider a capital injection for the struggling electricity holding.

The head of the CCEE electricity trading chamber, Rui Altieri, said deep recession in Brazil had hit demand for electricity, leaving distributors with supply 10 percent in excess of demand. The surplus could top 12 percent next year, he warned.

$1 = 3.53 Brazilian reais Reporting by Rodrigo Viga Gaier; Additional reporting by Luciano Costa; Editing by Frances Kerry

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