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UPDATE 1-Brazil food price spike is temporary, pandemic-fueled supply shock -treasury secretary

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BRASILIA, Sept 9 (Reuters) - The recent sharp rise in Brazilian food prices is part of a temporary global phenomenon caused by a coronavirus pandemic-induced supply shock, Treasury Secretary Bruno Funchal said on Wednesday, adding it would soon pass.

Figures showed earlier on Wednesday that food and drink prices rose 0.78% in August, one of the biggest drivers of inflation last month, and Brazil eliminated taxes on some rice imports through Dec. 31 to help combat a steep increase in domestic prices.

“It is a temporary shock. This will be reversed soon, but it is a worldwide phenomenon related to the pandemic,” Funchal said in a live online event hosted by the FUCAPE Business School.

Government statistics agency IBGE said on Wednesday that rice prices rose 3% in August and were up 19% this year. Beans, the other half of the country’s staple diet, were up as much as 30% this year, IBGE said.

In a presentation and question-and-answer session, Funchal reiterated the government’s view that “expansionary austerity” - cutting public spending to encourage private-sector investment - was the only way to lift productivity, investment, demand and economic growth.

The spending splurge to cushion the economic impact of the pandemic, particularly emergency aid transfers to millions of Brazil’s poorest people, was “necessary, but temporary,” and fiscal consolidation would resume next year, he said.

“In 2021, we will return to have total control of spending, get debt on a more sustainable path,” Funchal said, adding that was needed to give investors confidence and help keep interest rates low.

Funchal also said the economy was on course to shrink by about 5% this year, less than many other countries and also recovering faster than many. The government’s official target is for a decline of 4.7%. (Reporting by Jamie McGeever and Gabriel Ponte; Editing by Sandra Maler and Peter Cooney)

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