Press Release No. 03/151

Press Release: IMF Completes Brazil's Fourth Review, Approves US$4.1 Billion Disbursement

September 5, 2003

The Executive Board of the International Monetary Fund (IMF) has completed the fourth review of Brazil's performance under the SDR 22.8 billion (about US$31.3 billion) Stand-By Arrangement approved on September 6, 2002 (see Press Release No. 02/40). Completion of the review allows Brazil to draw the equivalent of up to SDR 3 billion (about US$4.1 billion), half of which is under the Supplemental Reserve Facility (SRF). A fifth and last review under the current agreement, which would allow a final disbursement of SDR 5.6 billion (about US$7.7 billion), is expected to occur before it expires on December 31, 2003.

Following the Executive Board review of Brazil, Anne Krueger, First Deputy Managing Director and Acting Chair, said:

"Brazil's performance under the Stand-by Arrangement, approved on September 6, 2002, remains strong. All performance criteria associated with the fourth review were met, and benchmarks on the submission of tax and pension reform proposals were achieved well ahead of schedule. This commendable policy performance has led to improvements in financial market variables and has set the stage for a return to sustained and dynamic growth.

"The government's prudent fiscal and monetary policies have been indispensable in restoring confidence. The solid fiscal outturn clearly demonstrates the government's commitment to the primary surplus target. The proactive response of monetary policy to inflationary pressures in late 2002 and earlier this year has resulted in a steady decline of monthly inflation rates and inflation expectations, allowing the central bank to begin easing monetary policy. As inflation indicators continue to converge to government targets, there will be room in coming months for further easing monetary policy. The steady relaxation of monetary conditions should provide an important boost to growth.

"Successful implementation of the structural reform agenda will also consolidate confidence gains and further support investment and growth. Passage of the pension, tax and bankruptcy measures will bring direct benefits in terms of reducing fiscal imbalances, removing inefficiencies and reducing the cost of capital, while also underscoring the government's commitment to undertake the reforms necessary to restore sustainable and equitable growth over the medium term."