The International Monetary Fund Wednesday extended a financial lifeline to Brazil, granting that country a $30 billion dollar credit.
The IMF loan is intended to be the strongest possible endorsement of Brazil's current economic and financial policies. In announcing the loan, IMF managing director Horst Koehler said the credit underpins macroeconomic stability and will promote economic growth. He said Brazil is pursuing solid policies and strongly deserves this 15-month loan.
Brazil has a large foreign debt and creditors, distressed by the financial meltdown in Argentina, have been worried that a leftist candidate may win October's Brazilian presidential election. The resolve of the IMF to stand behind Brazil is intended to diminish the speculative pressures that have prompted a decline in Brazilian stock prices and the currency's exchange rate.
By some measures the Brazil loan will be the largest in IMF history. The monetary fund is not only committing $30 billion of new money, it is permitting the Brazilians to reduce their foreign currency reserves by 10-billion dollars.
The deal comes on top of a $15 billion dollar IMF loan to Brazil that was approved only last September. U.S. Treasury Secretary Paul O'Neill was in Brazil earlier this week and expressed hope that a new IMF agreement was near.