Brazil's nominal budget deficit for the first half of 2009 widened to 43.7 billion reais (US$ 23 billion), the largest since 2001, according to the latest release from the Brazilian Central Bank (BC).
The June deficit of 10.1 billion reais comes after an 11.5 billion reais nominal deficit in May.
Higher government spending to stimulate the economy and less revenue from the slowdown in activity has impacted in Brazil's estimates for this year but officials are confident of a rebound in the second half. The nominal budget includes federal and local governments and state companies.
Finance Minister Guido Mantega said there was "no risk" Brazil would lapse on its fiscal targets this year.
"Our fiscal situation will be more comfortable in the second half of the year" as tax collection rises, Mantega told reporters in Brasília. "We will do whatever it takes to meet our targets".
Net debt-to-GDP rose to 43.1% in June compared with 42.5% in May. And the primary surplus (before interest payment) rose to 3.38 billion reais from 1.12 billion reais in May. The result pushed net debt to 2.04% of GDP, the lowest since August 1999 and below the government's year-end target of 2.5%.
The Brazilian government cut its primary budget surplus goal in April to 2.5% of GDP, from an initial 3.8% amid a decline in tax collection and to give government managed Petrobras leeway to make investments in offshore oil deposits.
Altamir Lopes, head of Economic Research at the Central bank, said net debt-to-GDP ratios are set to reverse as Latinamerica's largest economy resumes growth in the second half of the year.
IMF expects Brazil's economy to shrink 1.3% in 2009 before rebounding 2.5% in 2010. Analysts are forecasting a 0.34% contraction this year and growth of 3.5% in 2010, according to a July 24 Central bank survey. IMF also forecasted that the country's nominal deficit as percentage of GDP will be in the range of 1.9% at the end of the year.
However this hasn't stopped the Brazilian real from rallying 23% against the US dollar since April. Furthermore demand for Brazil's debt also remains strong.
The Treasury announced plans to reopen its 2037 dollar bonds in international markets for the first time since March, 2006. The average spread on Brazil's dollar bonds compared with US Treasuries has narrowed 1.69 percentage points so far this year to 2.59 percentage points.