Argentina receives debt lifeline

The IMF's Horst Koehler: Pledges assistance to Argentina

The International Monetary Fund has thrown Argentina a lifeline by postponing $933m in loan repayments for one year.

Putting back the repayments, which were originally due on Thursday, will give President Eduardo Duhalde's interim government extra breathing space as it grapples with the country's economic crisis.

US President George Bush also pledged help, but warned that Argentina would face a "bleak and stagnant future" unless it remained open to international trade.

Eduardo Duhalde: Hoping for more than $15bn in financial aid

"Free markets and open trade are the best weapons against poverty, disease and tyranny," he told the Organisation of American States in Washington.

President Duhalde has sharply criticised the past decade of free market reforms which failed to close the gap between rich and poor in Argentina.

The IMF pledged to continue working with the Argentine government in an effort to find a solution to the country's problems.

"The decision of the board shows the fund's desire to help Argentina overcome its difficult economic and social situation," said IMF managing director Horst Koehler in a statement.

The IMF "stands ready" to help draw up a strategy designed to "restore sustained growth" to the beleaguered Latin American republic, Mr Koehler added.

Confidence boost

The IMF's gesture may give the Argentine government greater leeway to relax highly unpopular restrictions on bank account withdrawals, and may also reduce inflationary pressures by shoring up the country's struggling currency.

Both steps would help to calm violent street protests which have forced two interim goverments to step down since early December.

The peso continued to tumble on Wednesday, falling to 1.95 against the dollar, down from around 1.65 late last week.

The loan deferral may also convince private lenders and foreign corporations with Argentine interests that there is some light at the end of the tunnel.

Argentina owes the IMF a total of $13.94bn, and is hoping for a further $15bn dollars in aid from the international community.

Helping hand

The IMF's debt lifeline marks a softening of the international lender's stance towards Argentina.

Last week, vice economy minister Jorge Todesca sharply rebuked the IMF for persistenly criticising his government's handling of the crisis.

The country's financial collapse was precipitated late last year when the IMF held back an urgently-needed $1.3bn dollar loan on the grounds that the Argentine government had failed to curb public spending.

The IMF is expected to send a delegation of economic experts to Buenos Aires in late January, tasked with hammering out a recovery plan in cooperation with Argentine officials.