Press Release No. 07/98

Press Release No. 07/98

The following statement was released today in Lima by an International Monetary Fund (IMF) mission:

"An IMF mission, led by Martin Cerisola, has been in Lima for the last two weeks for the first review under Peru's 25-month Stand-By Arrangement (SBA). The SDR 172.37 million SBA, which the authorities are treating as precautionary, was approved by the Executive Board of the IMF on January 26, 2007 (See Press Release No. 07/15 and Country Report No. 07/54)

"The authorities' program is yielding significant dividends. Peru's economy continues to enjoy broad-based and high growth, low inflation, and rising employment, supported by strong exports and foreign direct investment. Against this background, the authorities are focused on carrying forward macroeconomic, institutional and structural reforms that would entrench stability, promote equitable growth, and further reduce poverty.

"Macroeconomic policies remain prudent. Monetary policy continues to be appropriately forward looking, accommodating supply shocks while keeping inflation subdued. The recent reduction of the central bank's inflation target to 2 percent is an important step toward further consolidating price stability. Within fiscal policy, comprehensive tax reforms are underway that will broaden the tax base and simplify its structure, while the authorities will persevere further with efforts to rationalize tax exemptions and incentives.

"The authorities are also stepping up public investment and social spending, within the agreed multi-year fiscal framework, and consistent with their commitment to fiscal discipline and sustainability. In this regard, the authorities intend to finalize shortly the work on specific measures that would preserve a high quality of evaluation of projects to ensure productive investments, and also improve further the targeting of poverty by the reform of social assistance programs.

"The mission also welcomed the authorities' commitment to prioritizing reforms to entrench declining dollarization, establish a legal framework for Private-Public-Partnerships, and to deepen domestic capital markets.

"The mission expects that the first review of the SBA could be considered by the IMF Executive Board by end June, after management approval in Washington."