Brazil's September budget gap slightly narrower than expected

BRASILIA, Oct 30 (Reuters) - Brazil's central government recorded a primary budget deficit of 14.497 billion reais ($2.68 billion) in September, Treasury figures showed on Thursday.

Economists polled by Reuters were expecting a larger 15.3 billion reais shortfall.

The result reflected a modest 0.6% real increase in net revenue from a year earlier, while expenditures grew at a faster pace of 5.7%.

Over the 12 months through September, the central government posted a primary deficit of 35.6 billion reais, equivalent to 0.32% of gross domestic product (GDP).

The government's fiscal target for this year is a balanced budget, with the fiscal rule allowing a deviation of up to 0.25% of GDP in either direction.

However, under the country's fiscal framework, some large expenses, such as part of hefty court-ordered payments, can be excluded when assessing compliance with the rule.

Amid an ongoing debate with the audit court TCU about the need to seek the fiscal target itself, and not the tolerance range, Treasury Secretary Rogerio Ceron said such a goal would be unfeasible at this time.

He explained that meeting the target would require significant spending freezes in the government's bimonthly revenue and expenditure report.

As year-end approaches, those actions would mean the "collapse" of public services, he added.

Ceron also said the government has not been presented to the restructuring plan of cash-strapped postal service Correios and, because of that, the Treasury cannot yet evaluate giving potential guarantees to private loans to the state-owned company.

Correios said earlier in October it was in talks with a syndicate of banks for a loan of about 20 billion reais ($3.70 billion) to strengthen short-term financial liquidity.

($1 = 5.4039 reais)