UPDATE 1-Brazil's public sector gross debt drops to 77.5% of GDP in August

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BRASILIA, Sept 30 (Reuters) -

Brazil's gross debt continued to fall in July despite the primary deficit posted by the public sector, central bank data showed on Friday.

Brazil's government debt as a share of gross domestic product fell to 77.5% in August, from 78.2% in July, to the lowest level since March 2020 (77.03%).

The reduction was affected by the nominal GDP growth, and by net redemptions of public debt, as public bond redemptions outstripped government issuances.

The Brazilian public sector recorded a primary deficit of 30.279 billion reais ($5.60 billion) for the month, bigger than the 28.75 billion reais deficit expected by economists polled by Reuters.

The overall result was mainly driven by the central government deficit of 49.773 billion reais in August.

According to the Treasury, the shortfall was impacted by court-ordered judiciary payments which last year had been concentrated in June, and also by a billionaire agreement with the city of Sao Paulo regarding compensation for the occupation of an area where the Campo de Marte airport was built.

Meanwhile, states and municipalities recorded a 18.524 billion reais surplus in August and state-owned companies had a 970 million reais surplus.

In the 12 months to August, the public sector posted a primary surplus of 183.546 billion reais, equal to 1.97% of gross domestic product, the central bank said. ($1 = 5.4050 reais) (Reporting by Marcela Ayres; Editing by Steven Grattan)