Press Release No. <a name="P16_75"></a> 04/209

The following statement was released on October 1, 2004 by the International Monetary Fund (IMF) mission that recently visited Lima, Peru:

A mission of the International Monetary Fund (IMF) visited Lima during the last two weeks for discussions in the context of the first review under Peru's 26-month Stand-By Arrangement (SBA). The SDR 287 million SBA, which the authorities are treating as precautionary, was approved by the Executive Board of the IMF on June 9, 2004. The staff report to the Executive Board requesting the SBA can be found at: www.imf.org/external/pubs/ft/scr/2004/cr04226.pdf

The mission welcomed the favorable performance of the Peruvian economy in 2004. With continued implementation of the authorities' macroeconomic program, output growth has picked up led by exports, private investment, and a greater dynamism of employment and consumption. Notwithstanding recent increases in some prices owing to supply problems, the monetary authorities reiterated their commitment to keep the annual rate of inflation in December 2004 within the target range of one percent above and below 2.5 percent.

The mission commended the authorities for their continued commitment to fiscal consolidation. Also, it stressed the importance of implementing the programmed structural and institutional reforms to boost sustainable output and employment growth over the medium term. In this context, the mission supported the authorities' intention to lower the fiscal deficit to 1 percent of GDP in 2005, with the aim of reducing the economy's vulnerabilities. The mission and the authorities agreed on the importance of implementing in the remainder of 2004 and 2005 the growth enhancing structural reforms included in the program.

The mission has returned to IMF headquarters in Washington and is working toward the conclusion of the review.