UPDATE 1-Brazil posts record budget deficit in June as coronavirus slams economy

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BRASILIA, July 30 (Reuters) - Brazil’s government posted a record budget deficit of 194.7 billion reais ($37.6 billion) in June, the Treasury said on Thursday, substantially more than economists had expected, as the coronavirus continued to depress tax revenues and fuel emergency spending.

The primary deficit excluding interest payments was more than the 160 billion reais deficit economists in a Reuters poll had predicted, and took the shortfall excluding interest payments in the first half of the year to 417.2 billion reais.

That compares with a deficit of 29.3 billion reais accumulated in the first half of last year, Treasury said.

“It is important to note that the record deficit (in June) stems from the emergency measures and effects of the COVID-19 crisis,” Treasury said in a presentation.

Total net revenues in June for the central government, comprising the Treasury, central bank and social security system, were 65.1 billion reais, down 31% in real terms from the same month last year.

Expenditure totaled 259.9 billion reais, up 144% on the year.

The primary deficit accumulated in the 12 months to June was 483.9 billion reais, equivalent to 6.7% of gross domestic product, Treasury said.

Treasury reiterated its view that the government’s ‘spending cap’ rule, which limits growth in non-obligatory public expenditure to the rate of inflation, must not be tinkered with, as recent media reports have suggested officials are considering.

“It is a fundamental instrument to control the increase in expenditure and guarantee the sustainability of the public accounts,” Treasury said.

The government’s current forecast for this calendar year is a primary deficit of 787.4 billion reais, close to 11.0% of GDP.

Waldery Rodrigues, special secretary to the ministry, said last week that this is likely be reduced in new official forecasts to be published on Friday.

$1 = 5.18 reais Reporting by Jamie McGeever Editing by Chris Reese and Paul Simao