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UPDATE 1-Brazil's federal government reports bigger-than-expected deficit in May

(Adds details on government’s financial position, context)

BRASILIA, June 29 (Reuters) - Brazil’s federal government posted a bigger-than-expected primary budget deficit in May as net revenue fell during the period, official figures showed on Wednesday.

According to the Treasury, the budget deficit reached 39.4 billion reais ($7.55 billion) last month, worse than the median forecast of a 30.3 billion reais deficit in a Reuters poll.

Net revenue fell 3.3% in real terms over May of last year, as transfers to states and municipalities surged 35.4% on the same basis.

That jump occurred on the back of a 7.7 billion reais atypical transfer from proceeds received in the transfer of rights for the Sepia and Atapu deepwater oil fields, which are located in the pre-salt region.

Total government expenditures, in turn, rose 7.9% in May over the year-earlier period, driven by an increase in social security benefits after the government decided to bring forward the so-called thirteenth payment for retirees and pensioners.

In the 12 months to May, the primary deficit reached 21.3 billion reais, worth 0.26% of gross domestic product, the Treasury said.

In a separate document, the Treasury estimated that gross debt would end 2022 at 78.3% of GDP, the same level reached in April.

The government expects it to stabilize between 2023 and 2024 and then start to fall.

$1 = 5.2179 reais Reporting by Marcela Ayres; Editing by Chris Reese and Paul Simao

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