News Brief No. 02/88

News Brief: IMF Management Recommends US$200 Million Stand-By Arrangement for Paraguay

August 13, 2002

Shigemitsu Sugisaki, Deputy Managing Director of the International Monetary Fund (IMF), announced today that IMF Management will recommend an 18-month Stand-By Credit Arrangement for Paraguay amounting to about US$200 million. This recommendation is conditional on the authorities securing legislative approval of important fiscal measures and a law on bank resolution, as well as on the introduction of limits on lending by the state-owned development bank.

"Paraguay is moving to strengthen the economy's capacity to respond to the effects of economic turbulence that has surfaced throughout the region," Mr. Sugisaki stated. "The first pillar of its response is an emergency fiscal package that should help reduce the deficit in 2002, eliminate it next year, and set the stage for a sustainable fiscal stance over the medium term. The second pillar is an emergency financial law designed to strengthen the government's capacity to deal with problems in the banking sector. In addition, the Paraguay program envisages important structural reforms affecting the pension system, the organization of the central administration, and the financial sector, including reform of the state-owned development bank. These reforms should enhance Paraguay's growth prospects over the medium term."

"The Paraguayan authorities have requested IMF support for this program," the Deputy Managing Director stated. "They have emphasized their strong ownership of the planned measures, which the IMF Management views as an appropriate response to the key economic challenges facing the country. Management will submit the Paraguayan request to the IMF Executive Board after the implementation of the agreed initial actions, expected within the next few weeks."