{ "title": "Press Release: IMF Approves SDR 13 Billion Stand-By Credit for Brazil; Activates NAB", "publication": "IMF News, December 2, 1998", "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9859", "canonical": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9859", "overlayPath": "/en/news/articles/2015/09/14/01/49/pr9859/index.md", "summary": "IMF approved a three-year stand-by credit equivalent to SDR 13,025 million (about US$18.1 billion).", "authors": [ "Arrangement Proposed Calls Under" ], "publishDate": "1998-12-02", "sections": [ { "heading": "IMF approval and financing package", "content": "- IMF approved a three-year stand-by credit equivalent to SDR 13,025 million (about US$18.1 billion).\n- The stand-by credit equals 600 percent of Brazil’s IMF quota of SDR 2,170.8 million (about US$3.0 billion).\n- To help finance Brazil’s drawings during the first year, the IMF approved the first activation of the New Arrangements to Borrow (NAB).\n- Allocation of the SDR 13,025 million:\n - SDR 9,117 million (about US$12.7 billion), or 70 percent, under the Supplemental Reserve Facility (SRF).\n - Remainder through IMF’s regular lending facilities.\n- Availability through end-1999:\n - Equivalent of SDR 11,288 million (about US$15.7 billion) will be made available.\n - Of this, SDR 3,799 million (about US$5.3 billion) is available immediately.\n- Further SRF disbursements subject to implementation of key fiscal measures and IMF Executive Board reviews:\n - SDR 3,256 million (about US$4.5 billion) by end-February 1999 (could be brought forward).\n - Two SRF disbursements of SDR 1,302 million (about US$1.8 billion) each, subject to reviews scheduled by May 31, 1999 and August 31, 1999 (each could be brought forward to as early as March 1, 1999 and June 1, 1999, respectively).\n- Quarterly disbursements for remaining support starting after February 28, 1999:\n - First quarterly amount: SDR 543 million (about US$755 million), followed by the rest through the remainder of the program.\n- IMF will finance SDR 9,117 million of the total by borrowing the equivalent amount under the NAB (effective November 17, 1998).\n- NAB first call: SDR 2.9 billion (as noted in the NAB statement that the first call immediately following approval is for SDR 2.9 billion).\n- Table totals for NAB participants:\n - Total proposed calls: 31,200,000,000 (credit arrangements) and 9,117,360,000 (total proposed calls)." }, { "heading": "Background and macroeconomic context", "content": "- Real Plan (since July 1994) achieved sustained reduction of inflation and significant growth of real GDP per capita.\n- Public finances deteriorated as inflation tax disappeared:\n - Primary balance of the consolidated public sector: surplus of 5.3 percent of GDP in 1994 → deficit of about one percent of GDP by 1997.\n - External current account balance: near equilibrium in 1994 → deficit equivalent to 4.1 percent of GDP by 1997.\n- External pressures intensified after the Russian devaluation in mid-August 1998; government responses included sharply raising interest rates and emergency fiscal measures.\n- Authorities announced a front-loaded three-year fiscal adjustment program to stabilize public debt-to-GDP by the year 2000." }, { "heading": "Program objectives and macroeconomic scenario", "content": "- Program aims:\n - Resume sustained growth in real per capita income beginning in 2000, following a likely decline in 1999.\n - Continue low inflation.\n - Gradual improvement of the current account deficit to a sustainable level over the medium term.\n- Main policy elements:\n - A strong and front-loaded fiscal adjustment effort, with most adjustment expected in the first half of 1999.\n - Maintenance of the current exchange rate regime.\n - A firm monetary policy stance to support the exchange rate and safeguard net international reserves.\n - Wide-ranging structural reforms.\n- Macroeconomic scenario assumptions:\n - Confidence gradually rebuilt as measures are implemented and foreign financing access improves.\n - Interest rates assumed to remain relatively high, albeit declining, through the first half of 1999 and to decline further thereafter.\n - Real GDP growth expected to recover to 3 percent and 4 percent respectively in 2000 and 2001." }, { "heading": "Fiscal adjustment details", "content": "- Targets for primary surpluses of the consolidated public sector:\n - 2.6 percent of GDP in 1999.\n - 2.8 percent of GDP in 2000.\n - 3 percent of GDP in 2001.\n- Public Sector Borrowing Requirements (PSBR) projected:\n - About 4.7 percent of GDP in 1999.\n - About 3 percent of GDP in 2000.\n - 2 percent of GDP in 2001.\n- Federal measures to achieve targeted improvement:\n - Overall savings to the budget on the order of 3.4 percent of GDP in 1999.\n - Revenue measures: increases in the financial transactions tax and in social security contributions by public employees.\n - Expenditure measures: substantial cuts in discretionary current and capital spending; savings from implementation of recently approved constitutional reforms of the civil service and social security.\n - Government endeavored to safeguard social programs in allocation of expenditure cuts.\n- All levels of government expected to contribute to the fiscal adjustment effort." }, { "heading": "Structural reforms agenda", "content": "- Reforms aimed at longstanding weaknesses in:\n - Budget process.\n - Tax system and tax administration.\n - Public administration.\n - Social security.\n - Efficiency of public expenditure, especially in the social area.\n- Fiscal Responsibility Act to be submitted to Congress shortly as a centerpiece of budget-process reforms.\n- Administrative reform follow-up:\n - Enabling laws and regulations already submitted to Congress; expected to begin producing effects during 1999.\n- Comprehensive reform of the system of indirect taxation announced.\n- Social security reform:\n - Congress recently approved a constitutional amendment on social security reform.\n - Complementary legislation to be introduced early next year to deepen reform.\n- Privatization program (continuing in 1999) to include companies in the electrical sector (power generation and distribution), some remaining state banks, and some water, gas, and sewage public utilities.\n- Social spending priorities:\n - Priority to primary education and basic health care.\n - Promote more efficient use and financing of health and education, particularly at higher levels.\n - Better targeting of social expenditures for the poor." }, { "heading": "Additional financing commitments", "content": "- World Bank President indicated readiness to recommend up to US$4.5 billion in support of Brazil’s program.\n- Inter American Development Bank (IADB) President recommended an IADB support package of US$4.5 billion.\n- Bilateral support coordinated with the Bank for International Settlements (BIS) from industrial countries totaling approximately US$14.5 billion, available over the next 12 months.\n- First disbursement of bilateral support will be proportional to Brazil’s first drawing from the SRF resources under the credit." }, { "heading": "NAB activation — statement highlights", "content": "- NAB came into effect on November 17, 1998; this is the first activation.\n- NAB designed to supplement IMF resources to forestall or cope with impairment of the international monetary system or exceptional situations.\n- NAB participants agreed to finance IMF payments to Brazil under the SRF, which could amount to a total of SDR 9.1 billion.\n- The first NAB call following approval is for SDR 2.9 billion." }, { "heading": "Key statistics and selected indicators (from Table 2 and text)", "content": "- Stand-by credit and related amounts:\n - SDR 13,025 million (about US$18.1 billion) — total stand-by credit.\n - SDR 9,117 million (about US$12.7 billion) — SRF portion.\n - SDR 11,288 million (about US$15.7 billion) — available through end-1999.\n - SDR 3,799 million (about US$5.3 billion) — available immediately.\n - SDR 3,256 million (about US$4.5 billion) — SRF tranche by end-February 1999.\n - SDR 1,302 million (about US$1.8 billion) — each of two further SRF disbursements.\n - SDR 543 million (about US$755 million) — quarterly disbursement after February 28, 1999.\n- Historical and projected macro indicators (selected):\n - Change in real GDP: 1995 = 4.2; 1996 = 2.8; 1997 = 3.2; 1998 = 0.5; 1999 = -1.0 (in percent).\n - Unemployment rate : 1995 = 4.7; 1996 = 5.4; 1997 = 5.7; 1998 = 7.6; 1999 = ... .\n - Change in consumer prices (IGP-DI; 12-months): 1995 = 17.8; 1996 = 9.3; 1997 = 7.5; 1998 = 1.5; 1999 = 2.0 (in percent).\n - Exports, f.o.b. (in billions of U.S. dollars): 1995 = 46.5; 1996 = 47.7; 1997 = 53.0; 1998 = 53.8; 1999 = 57.6.\n - Imports, f.o.b. (in billions of U.S. dollars): 1995 = 50.0; 1996 = 53.3; 1997 = 61.4; 1998 = 58.8; 1999 = 54.8.\n - Current account balance (in billions of U.S. dollars): 1995 = -18.0; 1996 = -23.0; 1997 = -33.3; 1998 = -32.9; 1999 = -26.0.\n - Capital account balance (in billions of U.S. dollars): 1995 = 31.5; 1996 = 32.0; 1997 = 25.4; 1998 = 19.7; 1999 = 33.0.\n - o/w Foreign direct investment (in billions of U.S. dollars): 1995 = 3.9; 1996 = 9.4; 1997 = 16.9; 1998 = 23.9; 1999 = 18.8.\n - Gross official reserves (in billions of U.S. dollars): 1995 = 51.5; 1996 = 60.1; 1997 = 51.7; 1998 = 41.6 .\n - Current account balance (in percent of GDP): 1995 = -2.6; 1996 = -3.0; 1997 = -4.1; 1998 = -4.2; 1999 = -3.6.\n - Public sector borrowing requirement (in percent of GDP): 1995 = 7.2; 1996 = 5.9; 1997 = 6.1; 1998 = 8.1; 1999 = (not listed in table).\n - Primary balance of the federal government (in percent of GDP): 1995 = 0.6; 1996 = 0.4; 1997 = -0.3; 1998 = 1.8.\n - Net public debt (in percent of GDP): 1995 = 30.5; 1996 = 33.3; 1997 = 34.5; 1998 = 43.3; 1999 = 46.7.\n - Change in broad money (in percent): 1995 = 29.0; 1996 = 13.3; 1997 = 13.7; 1998 = 6.8; 1999 = 5.0.\n - Average overnight interest rate (in percent): 1995 = 53.1; 1996 = 27.4; 1997 = 24.8; 1998 = 29.7; 1999 = 21.9.\n- Brazil’s outstanding use of IMF credit at the time: SDR 7.8 million (about US$11 million).\n\nContacts listed in the release: Melinda Cilento (Canberra) Tel: 61-2 6263-2847; Greg Taylor (Washington, DC) Tel: 1-202 623-8874.\n\nPress Release No. 98/59, December 2, 1998.\n\n---\n\n\n References\n\n- Brazil and the IMF\n- Press Releases\n- PRESS CENTER\n- see Press Release No. 97/59\n- see Press Release No. 98/57\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9859" } ], "bullets": [ "[Markdown version](/en/news/articles/2015/09/14/01/49/pr9859/index.md)", "[Structured JSON version](/en/news/articles/2015/09/14/01/49/pr9859/index.json)", "[Bundle manifest](/en/news/articles/2015/09/14/01/49/pr9859/bundle-manifest.json)", "Authors: Arrangement Proposed Calls Under", "Published: December 2, 1998", "IMF approved a three-year stand-by credit equivalent to SDR 13,025 million (about US$18.1 billion).", "The stand-by credit equals 600 percent of Brazil’s IMF quota of SDR 2,170.8 million (about US$3.0 billion).", "To help finance Brazil’s drawings during the first year, the IMF approved the first activation of the New Arrangements to Borrow (NAB).", "Allocation of the SDR 13,025 million:", "Availability through end-1999:", "Further SRF disbursements subject to implementation of key fiscal measures and IMF Executive Board reviews:", "Quarterly disbursements for remaining support starting after February 28, 1999:", "IMF will finance SDR 9,117 million of the total by borrowing the equivalent amount under the NAB (effective November 17, 1998).", "NAB first call: SDR 2.9 billion (as noted in the NAB statement that the first call immediately following approval is for SDR 2.9 billion).", "Table totals for NAB participants:", "Real Plan (since July 1994) achieved sustained reduction of inflation and significant growth of real GDP per capita.", "Public finances deteriorated as inflation tax disappeared:", "External pressures intensified after the Russian devaluation in mid-August 1998; government responses included sharply raising interest rates and emergency fiscal measures.", "Authorities announced a front-loaded three-year fiscal adjustment program to stabilize public debt-to-GDP by the year 2000.", "Program aims:", "Main policy elements:", "Macroeconomic scenario assumptions:", "Targets for primary surpluses of the consolidated public sector:", "Public Sector Borrowing Requirements (PSBR) projected:", "Federal measures to achieve targeted improvement:", "All levels of government expected to contribute to the fiscal adjustment effort.", "Reforms aimed at longstanding weaknesses in:", "Fiscal Responsibility Act to be submitted to Congress shortly as a centerpiece of budget-process reforms.", "Administrative reform follow-up:", "Comprehensive reform of the system of indirect taxation announced.", "Social security reform:", "Privatization program (continuing in 1999) to include companies in the electrical sector (power generation and distribution), some remaining state banks, and some water, gas, and sewage public utilities.", "Social spending priorities:", "World Bank President indicated readiness to recommend up to US$4.5 billion in support of Brazil’s program.", "Inter American Development Bank (IADB) President recommended an IADB support package of US$4.5 billion.", "Bilateral support coordinated with the Bank for International Settlements (BIS) from industrial countries totaling approximately US$14.5 billion, available over the next 12 months.", "First disbursement of bilateral support will be proportional to Brazil’s first drawing from the SRF resources under the credit.", "NAB came into effect on November 17, 1998; this is the first activation.", "NAB designed to supplement IMF resources to forestall or cope with impairment of the international monetary system or exceptional situations.", "NAB participants agreed to finance IMF payments to Brazil under the SRF, which could amount to a total of SDR 9.1 billion.", "The first NAB call following approval is for SDR 2.9 billion.", "Stand-by credit and related amounts:", "Historical and projected macro indicators (selected):", "Brazil’s outstanding use of IMF credit at the time: SDR 7.8 million (about US$11 million).", "[Brazil and the IMF](http://www.imf.org/external/country/BRA/index.htm)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[see Press Release No. 97/59](https://www.imf.org/external/np/sec/pr/1997/pr9759.htm)", "[see Press Release No. 98/57](https://www.imf.org/external/np/sec/pr/1998/pr9857.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2015/09/14/01/49/pr9859/index.md", "json": "/en/news/articles/2015/09/14/01/49/pr9859/index.json", "bundleManifest": "/en/news/articles/2015/09/14/01/49/pr9859/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T22:48:08.809Z" }