MercoPress. South Atlantic News Agency

Brazil on schedule with IMF.

Brazil recorded last August a primary budget surplus equivalent to 1,65 billion US dollars and considers “perfectly feasible” a similar figure in September which should ensure the compliance of targets agreed last year with the International Monetary Fund, IMF, according to a report from the Brazilian Central Bank.

The primary budget surplus in the first eight months of 2003 was 16,8 billion US dollars equivalent to 4,91% of GDP, compared to 4,41% in the same period a year ago.

In September 2002 just before the national election, the Brazilian government and all presidential candidates, in exchange for a 30,5 billion US dollars support from the IMF, agreed to a primary budget surplus of 18,1 billion US dollars in the period extending from January to September 2003.

"This means we need to achieve a 1,7 billion US dollars primary surplus in September which is perfectly feasible" said Altamir Lopes from the Brazilian Central Bank.

On taking office and with the purpose of calming markets fears President Luiz Inacio Lula da Silva committed his administration to a 4,35% primary budget surplus, well above the 3,75% demanded by the IMF.

In the last twelve months (September 2002/August 2003) Brazil's budget deficit reached 6,18% of GDP (10,53% committed to honouring debt interests minus 4,35% primary surplus). However last July the index was 6,04% of GDP.

Mr. Lopes said that the slight increase can be explained by the momentum of basic interest rates that had a floor of 26,5% before they began to fall last June. The basic rate now stands at 20%, and is expected to continue soft landing with the full impact felt "sometime towards the end of the year".

Brazil's net public debt at the end of August stood at the equivalent of 297,1 billion US dollars, and its ratio at 57,7% of GDP. In July it was 57,2%.

Mr. Lopes argued that the increase was not because of Brazil's current stagnation (the country's economy contracted 1,6% in the second quarter and the overall 2003 expansion is forecasted at 0,5%), but rather because of price fluctuations and debt payments.

"The debt/GDP ratio for September is expected to be 57,6%, and we estimate it will continue at this level for the rest of 2003", said Mr. Lopes.