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 Friday, 17 January, 2003, 20:51 GMT
IMF boss backs Argentina deal
Horst Koehler
Mr Koehler says Argentina's economy is stabilising
The head of the International Monetary Fund (IMF) has said he will recommend approval of stop-gap financial support to Argentina.

IMF managing director Horst Koehler said he would recommend the move to the IMF board despite the "exceptional risks" it posed.

ARGENTINE STORIES
Silvia who collects rubbish for a living
We chose the wrong people to direct us - we're now paying the price

Silvia
Rubbish collector
His comments come as the Argentine government said it would meet a $1bn debt payment to the IMF, due on Friday.

Earlier - in a sign the country's crippling four-year recession may finally be bottoming out - figures showed Argentina's industrial output went up by 8.6% in December, compared to the same month last year.

It is the second consecutive monthly rise in output after 27 months of declines.

'Stabilized'

Following tense negotiations, the Argentine government said it had reached an agreement with the IMF for a $6.6bn to cover the country's repayments to the fund until the end of August.

The move will provide short-term relief for Argentina's ailing economy.

But a more permanent, long-term solution will still have to be reached, after Argentina's elections in April.

Mr Koehler said: "I have decided to recommend the approval of this arrangement as a demonstration of the good faith effort of the international community in favour of Argentina."

Mr Koehler said Argentina's economy had "somewhat stabilized" but remained fragile.

He did not confirm the size of the loan.

He said the government has developed policies, which if put in place, could build a bridge to a more comprehensive programme with a new government in April.

Economists say there were still outstanding issues to be negotiated when a new government is elected.

These include increases in public utility charges and court orders releasing frozen banking deposits.

Famine fears

Argentina is experiencing its worst economic crisis in decades and is in default on loans with most major international donors.

Half the country's population is living in poverty and children have begun starving to death in the north of the country.

Earlier this week, Argentina defaulted on a $681m debt payment to the Inter-American Development Bank.

See also:

17 Jan 03 | Business
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13 Dec 02 | Business
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