UPDATE 1-Brazil wants to delay vote on controversial state-debt bill

Wed Apr 2, 2014 10:11am EDT

(Adds Mantega's comment on bill)

BRASILIA, April 2 (Reuters) - The Brazilian government has asked lawmakers to delay an impending vote on a bill that would threaten the country's fiscal-savings targets by allowing states to borrow more, Finance Minister Guido Mantega said on Wednesday.

"We are asking for a vote on the bill to be delayed," Mantega said in an interview with Brazilian radio. He said the government would move to postpone a vote on other bills that also threaten the target.

The bill, which would retroactively lower the interest paid on states' debt with the federal government, could be submitted to a vote in Brazil's Senate in the coming days, the newspaper Valor Econômico reported on Wednesday, citing lawmakers.

The prospect of states taking advantage of lower rates to borrow more have worried investors, who have been closely monitoring the deterioration in Brazil's fiscal performance.

The rapid erosion of the country's finances led Standard & Poor's to lower Brazil's debt rating closer to junk status last week.

Mantega also said a recent pick-up in food prices due to a prolonged drought should be temporary. Higher food-price inflation is expected to prompt the central bank to raise interest rates for a ninth time later on Wednesday. (Reporting by Walter Brandimarte and Alonso Soto; Editing by Chizu Nomiyama and Bernadette Baum)

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