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Last Updated: Wednesday, 14 December 2005, 10:54 GMT
Brazil to pay off IMF debts early
President Luiz Inacio Lula da Silva
The IMF has praised the policies of President Lula's government
Brazil has said it plans to pay off its entire $15.5bn (8.7bn) debt to the International Monetary Fund (IMF) by the end of the month.

The move will clear the country's obligations to the Washington-based lender two years ahead of schedule.

The Brazilian government said the early repayment reflected the improving performance of the country's economy.

It marks an economic turnaround for Brazil, which obtained IMF loans in 2002 to avoid defaulting on its debts.

Finance Minister Antonio Palocci said Brazil would fund the early repayment of its IMF debt from its reserves, which have swelled to $66.7bn from just $15bn two years ago.

"The repayment will save more than $900m in interest costs," Mr Palocci said.

Corruption scandals

Brazil had been expected to repay $7.03bn to the IMF in 2006 and $8.43bn in 2007, the Finance Ministry said.

IMF managing director Rodrigo Rato welcomed news of the early repayment.

He praised Brazil's "excellent track record" of economic policy management.

"This decision reflects the growing strength of Brazil's external position, especially continuing substantial trade and current account surpluses and strong capital inflows that have greatly boosted reserves and reduced external debt," Mr Rato said.

Brazil's decision to repay its IMF debts by the end of December comes as the government of President Luiz Inacio Lula da Silva struggles to deal with a number of corruption scandals.

The president's chief of staff Jose Dirceu was expelled from the country's Congress at the beginning of the month, following allegations he masterminded a scheme under which the governing Workers Party allegedly paid bribes to its congressional allies for votes.

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