* Brazil government to freeze an extra $4.4 bln in budget
* Finance minister vows to meet fiscal target this year
BRASILIA, July 22 Brazil will freeze an
additional 10 billion reais ($4.4 billion) in budgeted spending
this year, officials said on Monday, in an effort to bolster
investor confidence in the government's commitment to fiscal
The new freeze, which was originally expected to reach up to
20 billion reais, is aimed at helping the central bank battle
inflation, which hit a 20-month high in June. Brazil's planning
ministry on Monday raised its projection for 2013 inflation to
5.7 percent from 5.2 percent previously.
The government had announced a budget freeze of 28 billion
reais in May, bringing the total amount for this year to 38
billion reais, below last year's freeze of 55 billion reais.
After two years of aggressive spending President Dilma
Rousseff is trying to convince investors her administration will
stick to the tough fiscal rules that helped stabilize Latin
America's largest economy after decades of crises.
Rousseff faces growing spending pressures after a recent
wave of nationwide demonstrations to demand investments in
health, education and other public services. The protests were
sparked by bus fare hikes.
Rousseff's approval rating plummeted and her re-election
chances haved dimmed since the protests, a recent poll
"I'm confident we will meet our (fiscal) targets this year,"
Finance Minister Guido Mantega told reporters, reiterating the
government aims for a primary budget surplus equal to 2.3
percent of gross domestic product this year. "Investors'
confidence will be recovering soon."
BUDGET GOAL IN DOUBT
Still, many analysts expect the government to miss its
primary target for the second year in a row.
"Despite the fact that we see the measures as insufficient
to guarantee a primary result of 2.3 percent of GDP this year,
they should help reduce uncertainty over fiscal policy,"
Brazilian economic consulting firm LCA wrote in a note to
clients following the announcement on Monday.
Originally, the government had set the goal at 3.1 percent
of GDP, later cutting the target after revenue fell due to a
flurry of tax breaks aimed at sparking economic growth. The
primary surplus represents the public sector's excess revenue
over expenditures before debt payments.
The new budget freeze includes spending on travel, rent,
electricity and the hiring of new public servants.
In rare comments on the country's fiscal strategy, central
bank chief Alexandre Tombini told a local newspaper on Sunday
the government needs to be clear in its next fiscal policy steps
to bolster investors' confidence in an economy showing new signs
The administration has relaxed tough fiscal rules in recent
years, using "creative accounting" methods to bolster savings
results that have been harshly criticized for lack of
transparency. The government has brought forward dividends of
state-owned companies and transferred cash from other funds to
bolster state coffers.
Higher public spending tends to fuel inflation and add to
the country's debt burden.
Although Brazil's debt levels are much lower than those of
some European countries, its expansionary stance forced the
central bank to lift interest rates from record lows and
prompted warnings from debt rating agencies.
In June, Standard and Poor's cut Brazil's rating outlook to
"negative" from "stable" due to weakening public finances.