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Tuesday, 2 April, 2002, 11:09 GMT 12:09 UK
Argentina pleads for new aid
Rioters in Argentina
The government is desperate to avoid more riots
A delegation from the International Monetary Fund (IMF) has arrived in Argentina to weigh up whether to grant the stricken country fresh aid.

New money is essential for Argentina to pull itself out of a deep financial crisis that has caused widespread rioting and deep social unrest.

Argentina in crisis
currency devalued
default on $141bn debt
25% unemployment
50% of population below poverty line
Argentina has been cut off from outside funds since it defaulted on $141bn of external loans in December.

Since then, prices have spiralled, unemployment has surged, and the economy is in a state of near-collapse.

A green light from the IMF would open the door to renewed lending from the wider international financial community.

Demanding change

President Duhalde is hoping to persuade the IMF to part with at least $10bn.

But the IMF has already made it clear that Argentina will have to make tough political decisions and economic reform before the money is released.

Anoop Singh
Anoop Singh is leading the IMF's mission
The IMF is trying to ensure that any new aid is used to rebuild the economy and is not wasted.

"We can't lend into anything that does not have the hope that Argentina can come out of it with the promise of growth...and that requires some changes," said Anne Krueger, the IMF's Deputy Managing Director.

Observers say the Argentine government's most difficult task is persuading the IMF that it will follow through with the economic reforms that are proposed.

Previous IMF loans were granted in return for a series of promises of economic reform that failed to materialise.

Ms Krueger has indicated that to win IMF favour, Argentina must develop a tighter budget, a sustainable fiscal and monetary policy, and a workable exchange rate regime.

It must also change bankruptcy laws, reverse the economic subversion law and lift banking restrictions.

Protest fears

Although some changes have already been initiated, President Eduardo Duhalde is still struggling to build an economic policy which will dig Argentina out of its hole.

The difficulties in dealing with provincial governors and the populist leanings of Mr Duhalde's Peronist Party has prevented planned cuts to public sector pay and pensions.

IMF wish list
lifting of banking restrictions
more budgetary restraint
changes to bankruptcy laws
workable exchange rate
sustainable fiscal and monetary policy
And the government fears that tough economic measures will create more short-term hardships and lead to further violent protests.

Since the free flotation of the peso, the currency has already lost about 70% of its value creating widespread price rises for fuel, drugs and groceries.

Unemployment in Argentina is affecting about a quarter of the workforce and nearly half the population is thought to be living below the poverty line.

Second time lucky?

An IMF team was also in Buenos Aires in the first two weeks of March, but no new funds were forthcoming.

Anoop Singh, the IMF's top negotiator on Argentina, led the March trip and is also leading the present trip.

Last week, Argentina received its first financial assistance since its economy went into full-scale meltdown late last year.

The Inter-American Development Bank, the biggest lender for development purposes in Latin America and the Caribbean, has redirected $694m (487m) to Argentina to help rebuild its social services.

But while these funds provide some hope, only lenders of the scale of the IMF have enough resources to help solve Argentina's cash crisis.

The BBC's Lourdes Heredia in Buenos Aires
"The IMF has said the government must undertake more economic reforms before aid can be released."
See also:

28 Mar 02 | Business
Aid returns to Argentina
26 Mar 02 | Business
Argentina awaits IMF 'mercy mission'
25 Mar 02 | Business
Argentina imposes new forex controls
20 Mar 02 | Business
Argentina props up ailing peso
13 Mar 02 | Business
Argentina peso hits new low
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