This should be music to economists' ears. Public spending cuts are widely seen as the necessary first step to reducing the government's borrowing requirements and freeing up money for investment and growth.

But the proposal comes in a worryingly unorthodox form. The additional surplus would be diverted to a sovereign wealth fund to be managed by the finance ministry. It makes no sense for Brazil to create such a fund. It has a dearth rather than a surplus of domestic savings and, worse, the SWF is widely regarded as a disguised tool of back-door monetary policy, "soaking up excess dollars" in the words of Guido Mantega, finance minister, and undermining the floating exchange rate regime managed by the central bank.

At the same time, the government is considering hiking its financial operations tax, the IOF, recently imposed on foreign investments in domestic government debt, in response to the flow of funds coming to Brazil following its promotion to investment grade by Standard & Poor's on April 30. And last week, Mr Mantega suggested the central bank should be more tolerant towards inflation, allowing it to drift towards the top end of its permitted range of two points above or below 4.5 per cent a year. The rate is already running at 5 per cent over the past 12 months, as food prices push up the consumer price index. The pressure is clearly on for the bank to keep interest rates where they stand at its next monetary policy meeting on June 3 and 4.

The government deserves high praise for, so far, keeping monetary policy on the straight and narrow. It should not waver - and it should bring fiscal policy into line, too.

Jonathan Wheatley