(Adds detail, quote) BRASILIA, April 29 (Reuters) - Brazil’s Treasury on Thursday slashed its 2021 debt forecast although it said debt will still continue to creep higher in the coming years, the same day it reported a surprise government surplus for the month of March. Treasury now sees total government debt ending this year at 87.2% of gross domestic product, significantly down from a previous estimate of 96.7% in its last long-term outlook published in October. Nominal GDP growth and brought-forward cash transfers to the Treasury from state-owned banks will improve the short-term outlook, but will not outweigh rising interest rates and continued primary deficits over the longer term, Treasury said. “We must keep moving forward with this agenda (of fiscal discipline), mainly by guarding against new, permanent obligations and by improving the quality of public spending,” Treasury said. If accurate, the new forecasts would mean last year’s 88.8% of GDP would be the record high for Brazil’s debt. Treasury’s forecasts accompanied figures that showed the government posted a budget surplus excluding interest payments of 2.1 billion reais ($391 million) in March, compared with a 21.1 billion reais deficit a year ago. Economists in a Reuters poll had forecast a 3.1 billion reais deficit. Net revenue jumped 21.3% in real terms to 118.1 billion reais, and spending fell 3.1% in real terms to 116 billion reais, Treasury said. In the first quarter of the year the government ran a surplus of 24.4 billion reais, compared with a 2.9 billion reais deficit in the same period last year, Treasury said. The swing was due to a 7.6% increase in revenue, in real terms. The accumulated primary deficit in the 12 months through March was 759.5 billion reais, worth 9.5% of gross domestic product, Treasury said.