News Brief No. 02/83

News Brief: IMF Managing Director Köhler Prepared to Recommend US$500 Million Increase in Stand-By Credit to Uruguay

August 4, 2002

International Monetary Fund Managing Director Horst Köhler said today he is prepared to recommend an increase of about US$500 million in the IMF's existing Stand-By Credit arrangement with Uruguay as part of a plan to provide about US$800 million in additional financial assistance from the IMF, the World Bank and the Inter-American Development Bank.

The augmentation by the IMF of the Stand-By Credit, which is subject to approval on August 8, 2002 by the IMF's Executive Board, would bring total IMF credit to about US$2.8 billion (SDR 2.125 billion), and would follow a previous augmentation (see News Brief No. 02/54) that was approved by the Board on June 25, 2002 of about US$1.5 billion (SDR1.16 billion).

The Managing Director also intends to recommend the acceleration of a disbursement amounting to about US$150 million in credit already committed to Uruguay under the Stand-By arrangement. When combined with the US$500 million increase, and about US$150 million already planned for disbursement to Uruguay in August, total IMF financing immediately available amounts to about US$800 million.

Mr. Köhler, who on Friday briefed the IMF's Executive Board on developments in Uruguay, noted that to enable the Uruguayan authorities to reopen the nation's banking system on August 5, 2002 temporary bridge financing amounting to about US$1.5 billion is to be provided through an arrangement between Uruguay and the U.S. government.

"The authorities have been formulating a plan that would facilitate the reopening of the banks and address the underlying imbalances that have emerged in the economy," the Managing Director stated. "Discussion with staff has been ongoing on a revised macroeconomic framework and a solution to the banking crisis."

"I am impressed by the authorities resolve to deal with a very difficult situation. We expect that the support from the international financial institutions will help address immediate liquidity needs, and assist the authorities' comprehensive and determined efforts to restore confidence in the banking sector," Mr. Köhler said. "We see a clear basis for confidence to return. The support of the international community is a recognition that the Uruguayan authorities are determined to continue to respond to the challenges affecting the economy."

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