Peru says no need for new financing, but may refinance debt

[LIMA] Peru's finance minister said on Friday he does not need additional financing to cover a"worrisome" fiscal deficit inherited from the previous government but may consider refinancing government debt to take advantage of cheap credit.

Alfredo Thorne, in answering questions from the opposition-controlled Congress, added that the government of Pedro Pablo Kuczynski has asked the International Monetary Fund and an autonomous board in the finance ministry to review public finances left by the previous government of Ollanta Humala.

Mr Kuczynski, a 77-year-old former investment banker and World Bank economist, took office on July 28 after campaigning on promises to cut the value added tax rate and deliver running water and other basic services to millions of Peruvians.

But the annualised fiscal deficit expanded to 3.3 per cent of gross domestic product in July, prompting the government to scale back its deficit reduction plans. "With the limited fiscal space that we can count on, we're going to have big difficulties in prioritising our new projects," Mr Thorne said.

But the government would not need additional financing, Mr Thorne said, in part because of loans from the World Bank arranged by the previous government.

"The only thing we would be evaluating is ... reconverting expensive debt to take advantage of favourable market conditions," Mr Thorne said, citing borrowing costs for Peru that are currently half as expensive as in Colombia and Brazil.

REUTERS