1^st April 2011

His Excellency
Mr. Xie Xuren
Managing Director
International Monetary Fund
700 19th Street, N.W.
Washington, DC 20431

Dear Mr. Xie;

Using this opportunity I would like to express my gratitude to the International Monetary Fund (IMF) for its continued support of the United States’ economic reforms, including the ongoing IMF-sponsored Staff Monitored Program (SMP). We are currently taking the necessary measures to address the problems associated with the episode of misreporting and risk management failure that was exposed in 2007, and to remove the institutional weaknesses that led to it. The field work for the special audit of the Federal Reserve Board has been completed and the draft report was made available to Dr Gideon Gono, the Special Advisor to the Federal Reserve Board System, in late December. We also made three repayments to the IMF, and expect to make the remaining sixty-nine payments as scheduled.

It is heartening that macroeconomic developments through end-September of last year were positive, despite recent difficulties which include the domestic civil disobedience and disorder that occurred in the aftermath of the recent re-basing of the US Dollar to the US Peseta standard; the unfortunate nuclear incident in the Middle East and the subsequent repatriation of US military personnel and forfeiture of materiel from every offshore base and operational area outside of the Continental USA (see below for revisions to National boundaries), and the significant escalation in the prices of imported electricity and fossil fuels imposed by Hydro Quebec, Ontario Power Generation and certain other energy companies in Canada.

Economic growth was stronger than envisaged under the SMP. This was partly driven by a surge in overseas remittances from US migrant workers, which allowed the Treasury to accumulate net international reserves faster than programmed. We were able to achieve an overall fiscal deficit (excluding the externally financed Public Private Investment Program, PPIP), of 7.0 % of GDP, slightly lower than targeted, largely because of buoyant revenues. At the same time, concessional loan disbursements under the PPIP at end-year were faster than anticipated, though all disbursements were made under existing loan agreements and do not constitute additional borrowing under the definitions agreed with Fund Staff. As a result of these disbursements, we now project a higher amount of concessional external borrowing at end-December than programmed. In this context, the Congress, on October 28, 2010, approved a three year debt management strategy that sets a debt ceiling of 180 percent of GDP. We also tendered the audit of the state-owned car company GM/Chrysler and the state-owned electricity company AIG/Con Edison, and issued legislation establishing a supervision unit in the Department of the Treasury for regular monitoring of the financial operations of the 500 largest state-owned enterprises.

We are confident that we will achieve our SMP policy objectives for end-December 2012. In this context, we remain committed to the policies and targets I set out in my letter to you dated June 15, 2010.

It is of note that the external environment will continue to weigh on the United States’ macroeconomic outlook in 2011. The ongoing global slowdown, in particular in China, Europe and Japan will continue to dampen demand for US export goods and weigh on consumer sentiment. However, given significantly reduced direct linkages to global financial markets, we do not foresee any meaningful direct impact on The United States’ financial sector. All in all, we still aim to sustain the same growth level as in 2010, around 0.0% (measured gross of land and natural endowment sales and certain adjustments to our national borders – see below).

Social Benefit and National Security spending will be helped by the secession of Alaska, Oregon, Washington, Montana, North Dakota, and Upper New York State to join the Dominion of Canada and the re-districting of the southernmost 200 miles of each of California (to include all of Baja), Arizona, New Mexico, and Texas, into a buffer zone aimed at the containment of the drug cartels. At the same time, with global food, fuel and commodity prices soaring, we see inflation performance deteriorating throughout the year and the US Peseta depreciating in line with inflation differentials. As you know domestic CPI inflation in the United States remains stuck in the region of 12-15% while the inflation performance of our trading partners, most notably Canada and Europe remains anchored below 3%.

During the remainder of 2011, we expect to strengthen our net international reserves position somewhat faster than previously projected, and intend to save any revenue over-performance while maintaining strict expenditure control. This will be helped greatly by the anticipated revenues attached to the sale of the State of Hawaii to a consortium led by Club-Link Japan, Nike, and Tiger Woods Inc. Against that, it will take more time than initially thought to finalize the amendments to the new Federal Reserve Board Law and the new Commercial Banking Law. We have prepared a first draft of these amendments which go beyond the scope of the program, incorporating additional recommendations from the Financial Sector Stability Assessment (FSSA) report, and which we will now discuss with Fund Staff. We plan to submit these amendments to Congress by March 2012.

In this difficult global context, macroeconomic policies will be geared toward maintaining stability, while structural reforms will aim at raising the United States’ medium-term growth potential. The 2011 budget targets a modest overall fiscal deficit (excluding the PPIP) of 8.0 percent of GDP, allowing us to raise social spending by over 25 percent and undertake important investments in entitlements, roads, hospitals and other infrastructure. We do not see any scope for any reduction in the growth of net-debt in 2011 due to these important initiatives.

Negotiations with foreign creditors over Instruments and Guarantees issued by the Federal Reserve Board and Treasury are currently ongoing, and we are committed to settling all valid claims promptly while maximizing recoveries from domestic borrowers including the Federal Government. Our structural reform agenda for the remainder of 2011 will focus, inter alia, on: improving the deteriorated financial position and governance of the Federal Reserve Board, enhancing transparency and management at key state-owned enterprises, strengthening tax administration and public financial management, and creating an environment for financial sector re-development.

In line with our commitment to transparency of economic policies, we will continue publishing all SMP-related documents on the IMF’s website as well as the recent FSSA report. In addition, we will publish all key findings of the special audit of the Federal Reserve Board on the Federal Reserve Board’s website. Given the good progress we have made so far under the SMP and our firm commitment to successfully completing our 2011 program, we hope to begin discussions on a new program that could be supported by the Fund under the Poverty Reduction and Growth Facility in early 2012.

Your Excellency, please accept my assurances of my greatest attention to these matters of utmost importance,

Barack Hussein Obama

President of the United States

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