UPDATE 2-Brazil relaxes budget target and spending cuts

Thu Mar 19, 2009 5:00pm EDT
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By Isabel Versiani and Raymond Colitt
BRASILIA, March 19 (Reuters) - Brazil's government said on Thursday it will reduce its primary budget surplus target in 2009 and freeze less spending than initially planned even after a sharply slowing economy caused tax income to tumble.
Some analysts said Brazil was beginning to abandon an ultra-conservative fiscal position and boost counter-cyclical spending to help combat the crisis.
The government intends to reduce its primary budget surplus target, which excludes debt payments, by 0.5 percent of gross domestic product to 3.3 percent of GDP, Planning Minister Paulo Bernardo said.
It is the first time Brazil would not consider some priority spending, worth 0.5 percent of GDP, as part of the primary budget surplus under an agreement with the International Monetary Fund.
The primary budget surplus, which excludes interest rates, is closely watched by investors as a gauge of a country's ability to service its debt.
At the same time, the government would freeze only 21.6 billion reais ($9.61 billion) in spending, compared with a temporary freeze of 37.2 billion reais it had announced in January.
The government will essentially tighten spending by less than it had projected in January."In January we didn't know what was going to happen with the revenues and the 37 billion was a cautious, conservative calculation," Bernardo told a news conference.