News Brief No. 02/85

News Brief: IMF Managing Director Köhler Confirms Agreement with Brazil

August 7, 2002

Horst Köhler, Managing Director of the International Monetary Fund (IMF), issued the following statement today:

"During the last week intensive discussions have taken place in Washington with a visiting Brazilian delegation and IMF staff and Management on a new 15-month Stand-By Arrangement. Agreement has been reached on a program that could be presented to the IMF Executive Board for approval in early September. We note that the Brazilian authorities are `convinced that this agreement serves well the interest of the country, and are confident that it will be supported by the leading presidential candidates in Brazil.' Consultations are underway in this respect.

"The new agreement would commit US$30 billion of additional financing by the IMF, 80 percent of which would be disbursed during 2003. In addition, the net international reserve floor stipulated under the current Stand-By Arrangement with Brazil will be reduced by US$10 billion immediately upon Executive Board approval of the program. In order to ensure fiscal sustainability over the medium term, the new program envisages the maintenance of a primary surplus target of no less than 3.75 percent of GDP during 2003 to be revisited at each quarter, and the inclusion of no less than that level of primary surplus target in Brazil's budgetary guidelines law for 2004 and 2005.

"By reducing vulnerabilities and uncertainties, a new IMF-supported program provides a bridge to the new administration starting in 2003, and supports the continuation of a policy strategy that will underpin macroeconomic stability and bring Brazilian economic growth closer to its potential over the medium term, preserve low inflation and external sustainability, and support efforts to increase employment and improve further social conditions for Brazilians.

"Brazil is on a solid long-term policy trend which strongly deserves the support of the international community. The active democratic debate within Brazil is to be welcomed, and as we have said, the Fund stands ready to support any government committed to sound economic policies."