UPDATE 2-Brazil central govt posts higher-than-expected primary deficit in November

(Adds comments from Treasury secretary in paragraphs 7-9)

BRASILIA, Dec 27 (Reuters) - Brazil's central government primary deficit in November exceeded market expectations due to a major spending increase, Treasury data showed on Wednesday.

The 39.4 billion reais ($8.16 billion) shortfall surpassed the 35.5 billion reais forecast by economists polled by Reuters. Total expenses rose 20% in real terms from November 2022, while net revenue grew 4.2%.

In a statement, the Treasury said expenditures rose due to its 11.3 billion reais funding to states and municipalities in November; higher spending in health, education, the welfare program Bolsa Familia; and pension benefits.

Year-to-date, the primary deficit reached 114.6 billion reais, reversing the 49.7 billion reais surplus for the year-ago period, after a steep fiscal deterioration mainly triggered by higher spending under the administration of leftist President Luiz Inacio Lula da Silva.

Last week, Finance Minister Fernando Haddad estimated that the 2023 primary deficit, considering the Treasury's methodology, would be around 130 billion reais or 1.3% of Brazil's gross domestic product. His Treasury Secretary Rogerio Ceron projected on Wednesday an annual deficit of 125 billion reais.

Haddad and his economic team had been aiming for a deficit equivalent to 1% of GDP this year, but have recently acknowledged that this would not be achievable.

Ceron said the target would have been achieved if the government had not paid around 20 billion reais this year to compensate states and municipalities for reducing their main tax rates under the previous administration to help combat inflation in 2022.

Revenue-boosting measures yet to be added to the 2024 budget include payments of 12 billion to 14 billion reais that state-owned bank Caixa Economica Federal will make to the Treasury by April, said Ceron.

He also mentioned new transfer pricing rules that would alter how Brazilian companies adjust prices in transactions with affiliated entities abroad. The tax revenue service estimated this could boost public revenues by 20 billion reais, added Ceron.

($1 = 4.8283 reais) (Reporting by Marcela Ayres; Editing by Richard Chang)