UPDATE 2-Brazil budget gap widens, primary target within reach
* Primary budget surplus totals 4.561 bln reais in August
* Brazil's debt-to-GDP ratio 39.2 percent last month
* Brazil expected to meet 2011 primary surplus target
* Cbank lowers 2011 nominal deficit view to 2.4 pct of GDP (Adds budget deficit details, debt issuance plans)
By Tiago Pariz and Isabel Versiani
BRASILIA, Sept 30 (Reuters) - Brazil's budget deficit widened in August from the year-ago period as its primary surplus shrank, underscoring the fiscal pressures facing Latin America's top economy, central bank data showed on Friday.
Brazil posted a consolidated primary budget surplus BRPSPS=ECI of 4.561 billion reais ($2.5 billion) in August, down from 5.2 billion reais in the same month last year.
Analysts in a Reuters poll had expected a primary surplus of 5.35 billion reais.
Despite the lower monthly surplus, Brazil is seen easily delivering on its 2011 primary budget surplus target of 128 billion reais ($69 billion) as higher tax revenues and slower spending help public coffers this year.
A surge in prices has increased pressure on President Dilma Rousseff to keep a lid on government spending despite growing demands for more funds from allies in Congress.
"Federal spending continues to rise modestly, helping the government meet its 2011 fiscal target," Itau Unibanco said in a research note to clients.
An increase in the minimum wage next year and more investment ahead of the 2014 World Cup will likely continue to put pressure on Rousseff to relax fiscal discipline, analysts say.
The primary budget surplus represents the excess of government revenue over all expenditure except for interest payments. As such, it is a gauge of a country's capacity to service its debt.
The primary budget surplus was equal to 3.78 percent of gross domestic product in the 12 months to August, the bank said.
Brazil plans to issue international debt before year-end, a senior government official told Reuters on Friday, a key test of the country's financial strength at a time when developed economies struggle with mounting debt and widening deficits. For details, see [ID:nS1E78T0XB]
OVERALL BUDGET DEFICIT WIDENS
The central bank said Brazil posted an overall budget deficit of 17.101 billion reais in August, more than triple the July deficit of 5 billion reais and more than the 10.7 billion in August 2010.
Still, the bank on Friday lowered its 2011 budget deficit estimate to 2.4 percent of GDP from 2.5 percent previously.
The overall budget balance, known locally as the nominal budget balance, factors in all expenditures, including interest payments.
Brazil's public sector debt was equal to 39.2 percent of GDP in August, the bank said. The bank reduced its 2011 estimate for public debt to 38.5 percent of GDP from 39 percent previously.
Investors are keeping a close eye on the Brazilian government's fiscal discipline as 12-month inflation runs above the central bank's 6.5 percent ceiling without showing clear signs of slowing.
In late August, Rousseff raised this year's primary budget surplus target by 10 billion reais, or 0.25 to 0.30 percent of gross domestic product, in a nod to the markets' concerns over her commitment to control inflation.
However, a surprise 50-basis-point central bank interest rate cut on Aug. 31 dented authorities' inflation-fighting credentials and fueled speculation the bank was more concerned with fueling growth as the global economy weakens.
The central bank on Thursday increased its 2011 inflation forecast to 6.4 percent and acknowledged that prices may even pierce its target ceiling of 6.5 percent.
A rash of labor strikes to demand higher wages highlights the growing demands faced by Rousseff and private companies to hike spending even when the economy starts to slow. ($1=1.8577 Brazilian reais) (Reporting by Isabel Versiani, Alonso Soto and Tiago Pariz; Writing by Luciana Lopez; Editing by Dan Grebler)