Argentina gets IMF approval

Argentina's economics minister Domingo Cavallo promises to get his budget in order

Argentina has secured international backing for its economic rescue plan.

Over the weekend, the International Monetary Fund agreed "in principle" to release instalments of a $40bn crisis package first promised in December.

The Argentinean economy is in a slump since three years now, suffering from the double blow of a strong US dollar and the collapse of the currency of its key trading partner Brazil. The Argentinean peso is pegged to the dollar.

Argentina's new economics minister Domingo Cavallo said "as of tomorrow we are going to conduct our finances in an absolutely normal way".

During the past few weeks, Argentine's President Fernando De la Rua replaced both his economics minister and the head of the central bank, in an attempt to restore investor confidence.

On Friday, the IMF had confirmed a similar rescue deal for Turkey's troubled economy.

Details need to be settled

However, both deals could potentially still fall apart, as the IMF and the governments in Istanbul and Buenos Aires have not settled all the details.

The IMF had not released the money agreed in the original aid package to Argentina, because the government had failed to meet key fiscal targets.

The IMF now says that the Argentinean government has "explained" how it will get back on track, and control its soaring debt burden.

The Argentinean government has liabilities of about $128bn, equalling nearly 50% of the country's gross domestic product.

In a statement, the IMF's International Monetary and Financial Committee said the measures announced by the Argentinean government were "an important and decisive step to boost confidence".

Economics minister Domingo Cavallo said there was no danger that Argentina would default on its debt payments, and the IMF loan should indeed make that impossible.

Mr Cavallo hopes to restore Argentina's economic fortunes with a broad package of economic reforms, among them the lowering of domestic taxes, improvements in tax collection, and pegging the peso to the dollar and the euro, once the dollar and the euro have reached parity.