May 19, 2016 / 9:28 PM / 2 years ago

UPDATE 1-Brazil eyes fiscal gap of 150 bln reais without Eletrobras -sources

(Recasts with fiscal shortfall estimate and minister comments)

By Alonso Soto

BRASILIA, May 19 (Reuters) - The Brazilian government will likely announce a budget deficit of just over 150 billion reais ($42.13 billion)in 2016 after it decided to remove from its accounts a possible capitalization of state power holding Eletrobras, two officials told Reuters on Thursday.

Planning Minister Romero Juca said earlier on Thursday that the government will remove a possible capitalization of up to 40 billion reais from its primary budget deficit target. He said a fresh injection of cash into the indebted company will hinge on the result of an ongoing investigation.

Trading in American depositary receipts of Eletrobras was suspended on Wednesday after the company told the U.S. Securities and Exchange Commission it would not file financial statements due to accounting problems. The government is concerned that Eletrobras’ debt ratings could be cut as a result, triggering early debt repayment clauses.

Without a capitalization the primary deficit will likely be just over 150 billion reais, said the two officials who are directly involved in the budget discussions.

The government of Interim President Michel Temer has accused the previous administration of hiding a series of fiscal liabilities that inflated the primary deficit to a record high.

Suspended President Dilma Rousseff had estimated a deficit of 97 billion reais for this year. The primary deficit, which represents revenues minus expenditures before debt interest payments, is a closely watched gauge of creditworthiness.

Government officials have publicly released a series of figures that go from a deficit of 120 billion reais to a shortfall of more than 200 billion reais.

Temer has until the end of this month for Congress to approve a new primary deficit target to avoid a government shutdown.

Juca said the new primary budget estimate for the year will be unveiled on Monday and that Congress will vote on the target that same week. ($1 = 3.5606 Brazilian reais) (Reporting by Alonso Soto; Editing by James Dalgleish)

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