WRAPUP 1-Fiscal discipline to help Brazil through crisis-govt

Thu Mar 5, 2009 3:14pm EST

By Ana Nicolaci da Costa and Isabel Versiani

BRASILIA, March 5 (Reuters) - Brazil will brave the financial crisis by sticking to austere fiscal policies, a strategy that should help it grow above the global average, the country's top two economic officials said on Thursday.

Slowing growth and falling tax revenues fanned fears Brazil would abandon the kind of fiscal discipline that helped the country revamp its public accounts, earned it an investment grade and made it a favorite among investors in recent years.

While many countries around the world are spending billions of dollars to counteract a global recession, Brazil's government has sought to strike a delicate balance between targeted spending on investments and fiscal restraint so as to keep its debt burden manageable.

"We will continue with a serious fiscal policy, balanced, so that we will have to cut current expenditures to be able to adjust to the drop in tax receipts that is actually taking place because of the crisis," Finance Minister Guido Mantega said in a speech at an economic conference in Brasilia.

On Wednesday, Mantega said the government would decide by March 20 if it will lower its primary budget surplus target this year from 3.8 percent of gross domestic product currently to free up cash for stimulus spending.

Brazil's 12-month primary budget surplus -- which excludes interest payments and is closely watched by investors as a gauge of a country's ability to service its debt -- already fell below that target in January to 3.58 percent, its lowest level in five years.

But officials reinforced they would stick to planned investments, especially in the Program to Accelerate Growth, which aims to improve the country's aging infrastructure, including roads, railways and houses.

"We will maintain all of the investment programs," Mantega added.