IMF Executive Board finishes Article IV consultation with Brazil
20 Jun '06
4 min read
On May 31, 2006, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Brazil.
Background Since the last Article IV consultation, the Brazilian economy has continued to expand, albeit at a more moderate pace than in 2004. Real GDP growth is expected to rise by some 3½ percent in 2006, up from 2¼ percent growth in 2004. Inflation has also converged toward the official target of 4½ percent, providing room for a sustained gradual easing of monetary policy starting in September 2005.
Brazil's external position has strengthened further. Favorable global market conditions, including buoyant demand and rising commodity prices have contributed to high trade and current account surpluses. At the same time, positive financial market sentiment, ample global liquidity, and high domestic interest rates have boosted capital inflows.
Sovereign bond spreads have narrowed to all-time lows, stock prices have risen to historic highs, and the real has appreciated to its highest level since early 2001, although the recent bout of volatility in world markets has reversed some of these gains.
The central bank has taken advantage of these favorable conditions to build official international reserves and retire external debt—including through the early repurchase of all outstanding obligations to the Fund and repayments to Paris Club creditors, as well as buybacks of private external debt. Brazil's external debt has declined to its lowest ratio to exports in more than twenty five years.
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