WASHINGTON, Aug 8: The International Monetary Fund announced a deal on Wednesday to extend 30 billion dollars — its biggest loan ever — to support Brazil’s battered economy.

“The new agreement would commit 30 billion dollars of additional financing by the IMF, 80 per cent of which would be disbursed during 2003,” IMF managing director Horst Koehler said in a statement.

The IMF agreed on the 15-month standby credit, which is in addition to a 15.2-billion-dollar programme reached in September last year, after discussions over the past week with a Brazilian delegation here.

The deal will be presented to the IMF board for approval in early September.

In addition, the IMF agreed to free up another 10 billion dollars in Brazil by loosening an agreed stipulation on how much the country must keep in reserves, the statement said.

The new reserve floor, lowered from 15 billion dollars to just five billion dollars, would be implemented immediately after the deal was approved by the IMF directors, it said.

The deal is aimed at steadying the economy in Brazil, where financial markets have been buffeted by worries about the policies that might be implemented after presidential elections in October and vulnerability to a crisis in Argentina. It also highlights the fact that Argentina has secured no deal with the IMF despite fighting for help since plunging into an economic and financial crisis late last year.

Brazil’s Finance Minister Pedro Malan said the deal would go a long way to ensure a smooth government transition after the October presidential vote. “It is an excellent agreement for Brazil,” Malan told Jornal Nacional.

The credit will help the country “overcome the turbulence and uncertainty that characterise the market at the present,” Malan said.

The United States and IMF, which praise Brazil’s fiscal rectitude, have repeatedly urged Argentina to rein in spending, particularly by its provinces, in return for financial assistance.

“Brazil has the right economic policies in place to maintain stability so that the economy can continue to grow,” the Treasury said in a statement. “The United States stands ready to support Brazil as it continues to implement these policies. We are pleased with today’s announcement,” the US Treasury said.—AFP