BRASILIA, May 12 (Reuters) - Brazil must do more if it is to meet its main budget surplus goal this year, and deep economic reforms are necessary to foster stronger growth in the future, the International Monetary Fund said on Tuesday.
In its annual assessment, the IMF pointed to government missteps that have dragged the once-booming Brazilian economy toward what is expected to be recession this year, but endorsed the more orthodox policies of new Finance Minister Joaquim Levy.
The IMF said further measures will be needed to meet this year's primary budget surplus target of 1.2 percent of Brazil's gross domestic product. The primary surplus, or excess revenues before interest payments on debt, is a key gauge of a country's capacity to repay debt.
"An ambitious and front-loaded fiscal consolidation is required for reducing public debt and restoring policy credibility," the IMF said in the report, which was completed March 4.
Faced with crumbling business confidence shortly after re-election in October, President Dilma Rousseff picked Levy, a known fiscal hawk, to rebalance public accounts after years of unchecked spending.
Levy has led an unpopular austerity push that has raised taxes on cosmetics and imports, and has severely cut spending on government programs.
Levy has warned the administration is ready to hike taxes again, raising a flurry of complaints from business and union leaders as well as some politicians who believe austerity will only deepen the recession.
In talks with IMF staffers, Brazilian officials said fiscal adjustment would be implemented in two years.
The IMF said Rousseff needs to push ahead with structural reforms to reduce the cost of doing business in Brazil and make the country more productive.
"Structural reforms are critical for improving the economy's productive capacity and to anchor strong, sustained, and balanced growth over the medium term," the IMF said.
However, reforms to overhaul generous pension and unemployment benefits are already experiencing tough resistance from Rousseff's allies in Congress.
The IMF points to other reforms such as a simplification of some of Brazil's taxes. Officials told IMF staffers that the government saw no immediate need to alter a controversial formula to adjust the minimum wage that is based on gross domestic product and inflation.
The IMF also warned of risks to the bottom lines of Brazilian companies and banks arising from years of low economic growth. (Reporting by Alonso Soto; Editing by Peter Galloway)