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Peru's Fujimori reaches pact with IMF

Published Jul. 1, 1990|Updated Oct. 17, 2005

Peru's president-elect, Alberto Fujimori, has reached an outline agreement with the International Monetary Fund and other development agencies on a plan to stabilize his country's tottering economy, resume payment on at least some of its external debts and reintegrate Peru into the international financial system. The agreement was hammered out Friday in meetings between Fujimori and the managing director of the International Monetary Fund, Michel Camdessus; the president of the World Bank, Barber Conable, and the president of the Inter-American Development Bank, Enrique Iglesias.

"Peru is going to rejoin the world economy," Fujimori said in an interview afterward.

During the five-year term of President Alan Garcia, Peru imposed limits on debt repayment, then stopped them altogether.

The action was hailed in other debtor nations as a reassertion of sovereignty eroded by the international lending agencies and the biggest commercial banks, but it left Peru cut off from virtually all outside economic assistance as it struggled to deal with a 2,000 percent annual inflation rate, an empty treasury, 60 percent unemployment, a growing leftist insurgency, and an increase in the cultivation of coca leaves, the raw material of cocaine.

Fujimori's plan includes a 300 percent tax increase and other measures that constitute the kind of drastic changes that the IMF and banks want from Peru and other debtor nations. IMF officials confirmed the broad outlines of the plan.

Fujimori was elected June 10 after saying during the campaign that he would seek to resume debt payments, and he made clear in the interview that he is now committed to enacting a tough economic austerity program under IMF supervision after he takes office July 28.

Fujimori, who left on Saturday for Tokyo, said he will seek Japanese support for his economic program.