Press Release No. 04/59

Press Release: IMF Executive Board Completes Sixth Review of Brazil's Stand-By Arrangement

March 26, 2004

The Executive Board of the International Monetary Fund (IMF) today completed the sixth review of Brazil's performance under an SDR 27.4 billion (about US$40.2 billion) Stand-By Arrangement (see Press Release No. 03/217 and Press Release No. 02/40).

The completion of the sixth review enables the release of a further SDR 911 million (about US$1.34 billion) to Brazil, which brings the total amount available to SDR 6.53 billion (about US$9.6 billion). The Brazilian authorities, however, have indicated that they do not intend to make any further drawings on the arrangement.

Following the Executive Board's discussion on Brazil, Anne Krueger, Acting Managing Director and Chair, made the following statement:

"Brazil's performance under the Stand-By Arrangement remains strong. All performance criteria and structural benchmarks for the sixth review were met, and a structural benchmark for the next review was met ahead of schedule.

"The Brazilian economy is poised for robust economic growth this year. Leading indicators are showing renewed strength in private consumption and investment, and domestic demand will likely be the driving force behind growth this year. These promising developments are being matched by a favorable performance of Brazilian assets in global financial markets.

"The recovery of growth owes much to the sound economic policies pursued by the government. The solid fiscal outturn in 2003 and the government's commitment to a strong fiscal stance in 2004 have ensured that debt dynamics remain on a steady downward path. The cautious response of monetary policy to the monthly inflation rates seen over the past three months has been appropriate and demonstrates the authorities' commitment to ensuring that inflation hits the mid-point of the target range in 2004.

"The government has made important progress in achieving its social goals. The Zero Hunger program is already providing substantial support to many of those in poverty while the creation of the Bolsa Família program is expected to lead to better targeting and coordination of social assistance spending. Ongoing improvements in the coverage and design of these programs should contribute to lasting improvements in social outcomes.

"Further progress on the government's structural reform agenda would help ensure that the current cyclical recovery develops into sustainable and long-lasting growth. Implementation of the government's pension reform, an overhaul of subnational consumption taxes, and passage of the new bankruptcy law will all support investment and growth. In addition, the government's efforts to deepen financial intermediation, improve the business climate, and reform the labor market will be indispensable to increasing productivity over the medium term, helping to secure a durable improvement in living standards for the Brazilian people," Ms. Krueger said.