Economy & Business - October 2003

The IMF is willing to offer Peru a new loan agreement when the current US$347m standby credit agreement expires in March, deputy managing director Agustí­n Carstens said on a visit to Lima. Carstens met economy minister Jaime Quijandrí­a and prime minister Beatriz Merino to discuss the likely terms of a new accord. He said that Peru was one of the countries to have best weathered a complicated regional and global economic situation.

Carstens did, however, express his scepticism about the new tax reforms being drawn up by the government, especially the controversial new tax on banking transactions. Quijandrí­a said that a 0.2% tax per operation would generate NS$2bn (US$575m) additional revenue in 2004. Carstens said that the IMF recommended that the tax be the lowest possible as there was a clear risk that it would discourage the use of banks and could lead to distortion. Business has also condemned the tax.

The government received special powers from congress to overhaul the tax system last month. Quijandrí­a said that the government needed extra revenue in order to carry out its promise to raise teachers' salaries (as agreed in June after a lengthy strike) and to balance the health, defence and transport budgets.

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