(Adds Rousseff comments)
By Alonso Soto and Lisandra Paraguassu
BRASILIA, Jan 15 (Reuters) - Expanding credit through state banks does not undermine Brazil’s current efforts to curb government spending and the central bank’s likely tightening of monetary policy, President Dilma Rousseff said on Friday.
The leftist leader also said the government, struggling to restore growth to an economy suffering its worst recession in decades, is worried about low world oil prices.
The government could inject fresh capital into embattled state-run oil company Petrobras if oil prices continue to drop, Rousseff said. She added that it had scrapped plans to auction oil blocs in an offshore region known as the subsalt, even though projects there remain technically viable.
Rousseff said Brazil will not be able to grow again if it does not control inflation and balance the government’s overdrawn books. But she said an expansion of credit was also needed.
“Tight fiscal policy is necessary, but that does not mean that we cannot have a credit policy ... aimed at certain sectors,” Rousseff told reporters during a briefing on Friday.
The government and central bank are trying to restore growth while also reining in inflation, currently running at an annual rate of 10.67 percent, the highest in 12 years. The bank, despite pressure from Rousseff’s leftist Workers’ Party and labor unions, has signaled it is ready to raise rates at its monetary policy meeting next Wednesday.
On the role of the central bank, the left-leaning president said: “The central bank has autonomy to set its policies, but it is still accountable to the rest of the government.”
Signaling her disagreement with raising rates, Rousseff said naggingly high inflation in Brazil is due to the high indexation of the economy, in which many contracts are pegged to price indexes. The bank has said monetary policy is best tool to battle inflation.
Although efforts to curb spending and rein in many stimulus measures failed to restore investors’ confidence last year, Rousseff hopes targeted credit will help revive some industries struggling with dwindling demand.
Sources in her administration said planned credit will target construction, especially housing, as well as small businesses and the promotion of exports.
Many investors are worried that plans to expand credit means Rousseff is relaxing efforts to rebalance public accounts in a return to the interventionist policies of her first term, which zapped confidence in the once-booming economy.
Rousseff said fiscal adjustment remains a priority. The approval in Congress of a financial transaction tax, known as CPMF, and changes over the taxation of a stock dividend known in Brazil as “interest on capital” are key to replenish the state coffers, she said.
Rousseff, whose government is feeling more confident in recent weeks that it can block an opposition attempt to impeach her, brushed off recent allegations of corruption leveled at her chief of staff, Jaques Wagner.
“They are repetitive. There is nothing new there,” she said of allegations that her 2014 re-election campaign received funds from kickbacks in a massive kickback scandal around state-run energy company Petroleo Brasileiro SA, or Petrobras. The allegations were made by defendants already arrested in the probe.
“We are ready to answer every (allegation) in any circumstances,” she said. (Reporting by Alonso Soto and Lisandra Paraguassu; Editing by Frances Kerry and Tom Brown)