UPDATE 2-Brazil sets 2025 fiscal target of zero primary deficit

(Adds details after official announcement)

BRASILIA, April 15 (Reuters) - Brazil's government on Monday set a fiscal target of zero primary deficit for 2025, postponing the path for debt stabilization initially planned when new fiscal rules were introduced last year.

The target, which was formalized in the budget guidelines bill by the Finance and Planning ministries, marks a relaxation from a 2025 surplus of 0.5% of gross domestic product that the government had suggested previously.

The ministries now forecast that a primary surplus of 0.25% of GDP will be achieved in 2026, rising to 0.5% of GDP in 2027 and 1% of GDP in 2028.

The government's initial forecast was that the latter would be achieved as early as 2026, the final year of leftist President Luiz Inacio Lula da Silva's administration.

Finance Minister Fernando Haddad sought to emphasize that despite the looser fiscal target, inflation in Brazil was under control.

"If we grow with inflation within the target, the issue of public debt becomes simpler," he said in an interview with GloboNews TV earlier on Monday, in which he confirmed the target tweak as it had already been published in the press.

After his remarks, the Brazilian real extended losses and weakened past 5.20 per dollar in spot trading, hitting its lowest levels since October 2023, also affected by strong U.S. data and tensions in the Middle East.

Haddad said the "challenging" international scenario was weighing on the Brazilian currency, but that things would go "back to normal" soon.

When Lula's administration introduced a fresh fiscal framework last year, constraining spending growth to 70% of revenue increases while permitting a minimum expansion of 0.6% and a maximum of 2.5% above inflation annually, it mandated the pursuit of primary budget targets alongside these regulations.

The government had established a target to erase the primary deficit this year, indicating that it would then seek a surplus of 0.5% of GDP in 2025 and 1% of GDP in 2026.

The government also established a range for achieving the fiscal target, which, starting this year, has a tolerance margin of 0.25 percentage point on either side. (Reporting by Marcela Ayres in Brasilia Editing by Gabriel Araujo, Leslie Adler and Matthew Lewis)