The IMF’s Executive Board announced on June 18 that Brazil is now eligible to draw up to the equivalent of about $10 billion (SDR 7.7 billion) immediately under its $15.7 billion loan (SDR 12.14 billion) with the IMF. The Board’s decision, following a third review of the country’s performance under a Stand-By Arrangement, adds about $4.8 billion (SDR 3.7 billion) to the $5.2 billion (SDR 4 billion) already available, but unused, under previous reviews.
Anne Krueger, First Deputy Managing Director and Acting Chair, noted that despite Brazil’s solid policy performance, “financial market developments in recent weeks indicate that the authorities’ commitment to maintain their cautious approach to macroeconomic policy is fully warranted.” Measures announced on June 13, she said, should enhance the country’s already-strong macroeconomic fundamentals and contribute to a stabilization in financial markets. In particular, “the increase in the primary surplus target for the consolidated public sector should contribute to improved public debt dynamics, while the recent tightening of liquidity should provide support to the real. The planned buyback of external debt should provide an improved benchmark for Brazilian corporations seeking to access international capital markets and help to strengthen the real. The lowering of the floor on net international reserves under the program will allow this operation to occur without reducing the central bank’s room for maneuver.”
Over the medium term, Krueger observed, additional progress in reducing the country’s large external borrowing requirement, the borrowing requirements of the public sector, and the large share of the public debt contracted at floating rates or linked to the exchange rate would—along with attention to the remaining elements of the structural reform agenda—should help further strengthen Brazil’s position.
For the full text of IMF News Brief 02/50 on Brazil, see the IMF’s website (www.imf.org).