Press Release No. 07/260

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Press Release No. 07/260

An International Monetary Fund (IMF) mission issued the following statement today in Lima:

"An International Monetary Fund (IMF) staff mission, led by Mr. Martin Cerisola, visited Lima over the past two weeks and completed the discussions for the second review and the economic program for 2008, under Peru's 25-month Stand-By Arrangement (SBA). The SDR 172.4 million SBA (about US$257.7 million), which the authorities treat as precautionary, was approved by the Executive Board of the IMF on January 26, 2007 (see Press Release No. 07/15).

"Peru's economic performance continues to surpass expectations. A prudent conduct of macroeconomic and reform policies, along with a supportive external environment, is securing conditions for sustained high economic growth, rising employment, and declining vulnerabilities, essential to achieve lasting improvements in living standards. Led by private investment and consumption, real GDP is envisaged to sustain in 2007 the high growth rate of 2006. While inflation has moved toward the upper bound of the 1-3 percent official target range—primarily reflecting external and transitory factors—the central bank remains appropriately focused on keeping expectations anchored and inflation contained. Fiscal policy has continued to overperform, helping to reduce public indebtedness further. This, along with the authorities' active debt management, are supporting the development of domestic capital markets, while providing renewed impetus to lowering dollarization in the financial system. The mission has also been encouraged by the reforms to simplify the National System of Public Investment (SNIP) to accelerate public investment, the appointment of a permanent head and staff at the Committee of Interministerial and Social Affairs (CIAS) to support poverty alleviation, and the commitment to establish a legal framework for Private-Public Partnership operations in the coming months.

"The authorities' strong commitment to stay their course and advance further reforms bode well for economic performance in 2008. Discussions have been very productive and the Fund-supported program is envisaged to continue assisting the authorities in their efforts toward entrenching macroeconomic stability, addressing social and infrastructure needs to lessen poverty, strengthening the quality of public spending and the tax regime, deepening domestic capital markets and financial intermediation, and enhancing the business environment. The IMF mission expects that the second review of the SBA and program for 2008 be considered by the IMF Executive Board by late December."