Brazil quits loan accord with IMF

President Lula da Silva says Brazil plans to stand on its own two legs

Brazil has announced it will not renew a $41.75bn (£22bn) loan accord with the International Monetary Fund (IMF).

Brazil's improved fiscal performance had reduced its vulnerability to shocks on global markets, reducing its need for IMF support, the government said.

The IMF backed the move, and called on Brazil to use high interest rates and spending cuts to stabilize its economy.

Brazil approached the IMF in 1998, shortly before a currency devaluation caused the country's debt load to soar.

Brazil's current loan accord with the IMF expires at the end of March.

Biggest debtor

The decision not to renew the loan accord was the result of Brazil's commitment to spending cuts and orthodox fiscal policies, President Luiz Inacio Lula da Silva said.

The decision by the authorities reflects the impressive results... of Brazil's macroeconomic stabilization and reform Rodrigo Rato, IMF managing director

"This decision was taken with the calm and serenity of a government that, with the sacrifice of all Brazilians, won the right to walk with its own two legs," he said.

Brazil's left-wing president faces re-election in October 2006.

The country, which is the IMF's biggest debtor, still owes the Washington multilateral lender $23.2bn.

IMF support

"The decision by the authorities reflects the impressive results, generally ahead of expectations, of Brazil's macroeconomic stabilization and reform," said IMF managing director Rodrigo Rato.

The move to end IMF support was praised by Mr Lula da Silva's Workers' Party, which has argued IMF loans represent the interests of investors rather than ordinary Brazilians.

"It is important we are no longer subordinate to the IMF," said party congressman Ivan Valente.

In August 2002, the IMF provided Brazil with a record $30bn lifeline as its markets slumped on Mr Lula da Silva's election as president.