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Sunday, 25 November, 2001, 16:53 GMT
IMF spotlight on Argentina
Buenos Aires skyline
Argentina is on the brink of world's largest debt default
By the BBC's Lourdes Heredia in Buenos Aires

An International Monetary Fund mission arrives in Buenos Aires on Sunday to study the country's accounts and decide whether to continue disbursing funds from Argentina's loan programme.

The government desperately needs a disbursement due in December to avoid a default on its $132bn debt.

The IMF mission comes in a crucial time, with increasing concerns in the financial markets that the country might be on the brink of world's biggest debt default.

Long recession

Argentina has been in recession for nearly four years.

This crisis has been reflected by a downturn in production, unemployment of more than 15%, growing poverty, withdrawals of bank deposits and climbing number of bankruptcies.

According to a recent report, wages in the private sector have fallen by about 20% in the past two years, while state employees have had their salaries and pensions cut by 13%.

IMF logo
The IMF is due to hand over $1.26bn in December
Many of the country's provinces are in crisis, falling behind on debt payments and unable to pay their workers.

Also, Argentina is well behind in meeting its macro-economic targets under the existing $22bn loan programme with the IMF.

This week, the government has accepted that the country's finances were in even worse state than thought.

In the first two weeks of November tax collection fell 16% compared with the same period last year, making it harder for the country to stick to its pledge to end deficit spending.

Total collapse risk

It now expects to post a $7.8bn budget deficit this year - substantially higher than the $6.5bn dollars limit agreed with the IMF.

In theory, that could jeopardize a $1.264bn loan disbursement due in December that Argentina desperately needs when it is negotiating a massive debt restructuring plan.

This debt swap is designed to ease the crippling interest payments on Argentina's $132bn debt and keep its economy afloat.

If the IMF support does not come on time, or if it is postponed, then this effort to avert the total collapse of the country's finances will be put at risk.

Argentina has not yet stopped making debt servicing payments, which would constitute a default in the true sense, but if it does default, observers say other emerging markets, like those of Brazil and Turkey, will also be jeopardised.

See also:

21 Aug 01 | Americas
Argentine salaries paid in bonds
20 Nov 01 | Business
Argentina begins vital debt revamp
15 Nov 01 | Business
Argentina announces debt swap
22 Aug 01 | Business
IMF agrees extra cash for Argentina
20 Jul 01 | Business
General strike paralyses Argentina
10 Sep 01 | Country profiles
Country profile: Argentina
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