Brazil and Argentina have paid in full—and earlier than expected—their entire outstanding obligations to the IMF amounting to $15.46 billion and $9.6 billion, respectively. IMF Managing Director Rodrigo de Rato welcomed the December 13 and 15 decisions.
Brazil’s decision, de Rato said, reflects the growing strength of the country’s external position, “especially continuing substantial trade and current account surpluses and strong capital inflows that have greatly boosted reserves and reduced external debt.” More fundamentally, de Rato added, “the excellent track record of policy management by the Brazilian authorities has provided the basis for the consolidation of market confidence, the sustained improvement of macroeconomic performance, and an improvement in the profile of domestic as well as external debt.”
The decision made by Argentina’s authorities, de Rato said, “reflects their confidence that their external position is sufficiently strong to warrant early repayment.” Important challenges and opportunities lie ahead for Argentina, he said, and the Fund looks forward to maintaining a productive relationship with the government. “We remain ready to assist the Argentine authorities in any way that would help them address these challenges,” he commented.
Brazil contracted its obligations under a Stand-By Arrangement that the Executive Board approved in September 2002, which was later extended and increased in December 2003. Argentina’s obligations stem from Stand-By Arrangements that the Board originally approved in March 2000, January 2003, and September 2003, and include a small amount extended under the Extended Fund Facility approved in March 1992.
Under the original expectations basis schedules, Brazil’s final repayments would have taken place in 2007, and Argentina’s in 2008.
Favorable developments offer Saudi Arabia chance to strengthen economic foundation
Thanks to record-high oil revenues and prudent macroeconomic management, Saudi Arabia’s economy grew by an impressive 5¼ percent in 2004, while inflation remained negligible, the IMF said in its annual economic review. With large current account and fiscal surpluses, reserves increased and government debt declined. The financial sector continued to perform well, and the stock market remained buoyant, reflecting growing confidence. The country has also continued to help ensure oil market stability by increasing oil supplies in line with growing demand and has begun expanding its oil production and refining capacity for the coming years.
Consistent implementation of structural reforms over the past several years has spurred economic diversification and private sector-led growth, creating the basis for more employment opportunities for Saudi nationals and enhancing the economy’s resilience to oil price shocks. The IMF Executive Board emphasized that the current favorable economic situation offers an opportunity to sustain and accelerate this reform momentum with a view to laying a strong economic foundation for future generations. It welcomed the authorities’ decision to use a part of the higher oil revenues to boost health and education expenditures, make much-needed improvements in physical infrastructure, and further strengthen the fiscal position through debt reduction. The Board also expressed its appreciation to the Saudi authorities for their significant development assistance to low-income countries.
|Real oil GDP||-3.9||-7.5||17.2||5.7||6.8|
|Real non-oil GDP||3.5||3.7||3.6||5.0||5.9|
|Consumer price index||-0.8||0.2||0.6||0.3||1.0|
|(percent of GDP)|
|Fiscal balance (deficit -)||-3.9||-5.9||1.2||9.6||16.8|
|Current account balance||5.1||6.3||13.1||20.5||31.2|
Looking ahead, the Board encouraged the authorities to contain the growth of recurrent outlays, gradually reduce implicit subsidies for electricity and water utilities, and adjust domestic energy prices broadly in line with international market developments. To foster investment and tap the potential of non-oil sectors, the Board underscored the importance of infrastructure and legislative and regulatory reforms. The strength of Saudi Arabia’s financial market will benefit from the ongoing liberalization of the financial system through enhanced competition and could be further enhanced to encourage financial innovation. The Board welcomed the reforms undertaken in the context of Saudi Arabia’s accession to the World Trade Organization, which will help create a business environment conducive to more private sector investment.