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IMF urges investment drive, tax reform for Peru
Reuters, 09.20.02, 11:59 PM ET
LIMA, Peru, Sept 20 (Reuters) - An International Monetary
Fund mission visiting Lima said on Friday that Peru's economy
is on the right track to growth but stressed the importance of
luring in private investment and boosting tax revenue.
"The mission expressed its satisfaction with the economy's
recovery, low inflation and solid reserves, and recognized
Peru's efforts to control public spending and improve tax
revenues, which are necessary to meet fiscal goals for 2002 and
2003," Andrew Wolf, the mission's head, said in a statement.
The IMF added this was the last overview it would conduct
of 2002 goals and that further talks on a standby agreement for
2002-03 goals would continue in Washington at the end of the
month.
The government of President Alejandro Toledo, who took
office last year promising jobs and a war on poverty, is aiming
for growth this year of between 3.5 and 4.0 percent, according
to targets set with the IMF. Gross domestic product (GDP)
growth was just 0.2 percent in 2001.
Latin America's No. 7 economy is also working to meet a
fiscal deficit of 2.2 percent of GDP this year. But many
economists say the government is likely to shoot past that goal
after a key plan to draw in some $800 million through
privatizations stumbled after protests in June.
To help secure desperately needed state funds, the
government has said it will issue international bonds for
around $500 million at the end of October that would be
guaranteed by the Andean Development Corp.
According to the 2003 draft budget proposal, the budget
deficit goal is 1.9 percent of GDP and the growth goal is 4.0
percent. Last year's fiscal deficit was 2.5 percent.
"The mission highlighted the importance of the private
investment promotion program, which is essential to helping
investment, to fueling growth, and creating jobs in the medium
term," the IMF said.
The government has also said it will work to boost
lackluster tax revenues by eliminating exemptions. Tax
exemptions cost Peru around $1 billion a year. Revenues
collected by the SUNAT tax agency and customs totaled 1.8
billion soles in 2001.
"The mission also took note of the importance of widening
Peru's tax base and ... significantly reforming the inefficient
tax exemption system," it added.
Wolf said that tax exemption reform "would create a
permanent financing source to cover social needs and reduce the
budget deficit to sustainable levels."
Officials say the economy is pulling out of a three-year
slump. GDP grew for the 12th straight month in July with an
expansion of 3.8 percent.
Copyright 2002, Reuters News Service
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