MercoPress. South Atlantic News Agency

IMF approves extension of Brazilian stand-by loan

The International Monetary Fund approved this Monday a fifteen months extension and increase in 6,6 billion US dollars of Brazil's stand-by credit originally approved in September 2002, taking the overall sum available to 14 billion US dollars. The IMF Board also approved a request to extend the deadline for loan repayments involving 5,8 billion US dollars that fall due in 2005 and 2006.

However the Brazilian government said it will not draw on the available funds which it described rather as "a precaution against economic turbulence".

The IMF decision was taken simultaneously with the completion of the fifth and last scheduled review of the original program, which made $8.2 billion US dollars immediately available to Brazil. However, in light of improvements in Brazil's balance of payments, the authorities have indicated that they do not intend to make further drawings.

Following the Executive Board's discussion of Brazil on December 12, 2003, Horst Köhler, Managing Director and Chairman of the Board, stated: "Brazil's performance under the Stand-By Arrangement approved on September 6, 2002 remains exemplary. All performance criteria and structural benchmarks associated with the fifth review were met. "Supported by the commitment of significant Fund resources, Brazil has come a long way since last year's financial market volatility. The response of the new administration to financial pressures has been both ambitious and courageous, balancing fiscal and monetary policy discipline with the resolute pursuit of key social goals to relieve poverty and strengthen the social safety net. To allay concerns over debt sustainability, the government increased the primary surplus target. The central bank responded proactively to guide inflation back to the government's targets. Moreover, early in its tenure, the administration took the difficult political step of seeking approval of key structural measures?including pension and tax reform?that will deepen the foundations for sustainable and equitable growth of output and employment.

"The successful implementation of these policies has resulted in a rapid restoration of confidence, which is being clearly reflected in the performance of financial market variables. Improved market sentiment, in part reflected in those variables, is driving an emerging recovery of economic activity, and demand growth should continue to accelerate in the coming year. Ensuring that all members of Brazilian society participate in the country's vast potential will be the government's key challenge for the coming years". (IMF sources).-