Peru May Face Further Drying Up of Credit

The Inter-American Development Bank (IDB) has stopped disbursing money to Peru over the last five months and will decide in September whether to suspend giving new credits to the country, financial sources said Tuesday.

The bank’s moves represent another blow to the South American nation that last week was shut off from new loans from the International Monetary Fund. Private banks also have stopped loaning money.

Meanwhile, in Lima, central bank President Leonel Figueroa said in an interview that Peru wants to repay its debt to foreign banks and governments at interest rates below market levels--and to pay only 2% per year on some credits.

In essence, Peru will submit proposals to foreign banks and governments to reschedule repayment over terms much longer than normal, with some years of grace, he said.

Peru owes foreign banks and lending institutions about $14 billion.

“Peru has been behind on its payments for several months and the (IDB) disbursements were detained in March,” said one financial source who asked to remain unidentified. “The amount of the commitments that Peru has not paid exceeds $20 million.”

On June 30, the amount of “detained” Inter-American Development Bank credits that would have been available totaled $533 million, the source said.

Government finance officials in Peru were not available for comment on the bank’s action.

Prime Minister Alva Castro has said he would join a top-level delegation of Peruvian finance officials in a trip to Washington to meet with the IMF and representatives of the World Bank. The date of the visit was not specified.

Castro, who also is finance minister, said that since the current administration assumed power last July, Peru has paid $320 million to service its total foreign debt.

Last Friday, the IMF declared Peru ineligible to receive new credits. The decision came despite Peru’s payment of $35 million for an overdue loan that, with interest and principal, totaled about $200 million.