UPDATE 1-Brazil's overall budget deficit exceeds 10% of GDP in 12 months through July

Recasts with further details, context

BRASILIA, Aug 30 (Reuters) - Brazil's public sector overall deficit exceeded 10% of gross domestic product (GDP) in the 12 months through July, central bank data showed on Friday, highlighting the fiscal challenges facing Latin America’s largest economy.

Under pressure from a hefty interest bill and rising public spending, the country's total deficit over 12 months reached 1.13 trillion reais ($195.48 billion) in July, equivalent to 10.02% of GDP.

This marks the worst print since April 2021, when it hit 10.25% in the aftermath of the COVID-19 pandemic.

The overall deficit in July alone was 101.4 billion reais, far above the 78.6 billion reais shortfall expected in a Reuters poll of economists.

The primary deficit, which excludes interest payments, reached 21.3 billion reais for the month, also surpassing the 5 billion reais deficit projected in the poll.

The result was driven by a primary deficit of 11 billion reais from states and municipalities, while the central government posted a result of 8.6 billion reais and state-owned companies recorded a 1.7 billion reais deficit.

Meanwhile, the interest bill amounted to 80.1 billion reais in July, affected by the growth in debt stock and associated costs amid a benchmark interest rate currently at 10.50%.

Brazil's government debt as a share of GDP, considered a key solvency indicator, rose to 78.5% in July from 77.8% the previous month, mainly due to higher interest payments, the central bank said.

Year-to-date, gross debt has already increased by 4.1 percentage points.

($1 = 5.6286 reais)

(Reporting by Marcela Ayres; editing by Gabriel Araujo)

((marcela.ayres@thomsonreuters.com; +55 11 5047-2444;))