February 21, 2014 / 4:10 PM / 4 years ago

UPDATE 1-Brazil does not rule out tax hikes to meet fiscal target -Mantega

BRASILIA, Feb 21 (Reuters) - The Brazilian government has not ruled out increasing taxes this year to meet its fiscal savings target, Finance Minister Guido Mantega said on Friday, sending markets a strong message that the country wants to prioritize fiscal austerity.

Mantega said that there are no tax increases planned in the 2014 budget, but that hikes cannot be ruled out as an alternative measure to pay for any extraordinary public spending.

The government announced a smaller primary budget surplus goal for 2014 on Thursday in a bid to regain its fiscal credibility with a more attainable savings goal.

Most economists doubt Brazil can meet the target in part because of a rising energy bill stemming from a drought that could cost the Treasury billions of dollars in subsidies.

The severe drought that has sapped hydroelectric output and increased the government’s spending on thermal power to maintain energy supply.

Mantega acknowledged that the government has not yet calculated the size of the energy bill, but that any extra cost will not derail the administration’s plan to meet the fiscal goal this year.

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