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Friday, 5 April, 2002, 06:00 GMT 07:00 UK
IMF 'to ignore' Argentina cash plea
Rioters in Argentina
The government is desperate to avoid more riots
The International Monetary Fund (IMF) is unlikely to release new funds to help Argentina's struggling economy, a report has said.


What they [Argentina] have to do, they can do it alone

IMF source
A delegation from the International Monetary Fund (IMF) arrived in Argentina earlier this week to decide whether to grant the country more aid.

"What they have to do, they can do it alone," an IMF source told Reuters news agency.

"This is a case where what they need is adjustment, it is not financing," he said.

IMF wish list
Lifting of banking restrictions
More budgetary restraint
Changes to bankruptcy laws
Workable exchange rate
Sustainable fiscal and monetary policy

"This is for their own good and they should understand that."

But some analysts believe that extra money could be essential if Argentina is quickly to pull itself out of its financial crisis, and revive its virtually bankrupt banking sector.

Argentina is stuck in a four-year recession that culminated in its default on $141bn of debt, and a currency devaluation.

Cash call

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

But it looks like he will have to chose between walking away from the IMF and risking the return of hyperinflation, or backing an austerity programme likely to increase social unrest.

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.

Observers say the Argentine government's most difficult task is to persuade IMF chiefs that it will implement proposed economic reforms.

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

Poverty concerns

But Mr Duhalde is desperate to avoid lumbering Argentina's people with further hardships.

The nation's economic woe was largely responsible for the violent street protests in December which forced the resignation of then president Fernando de la Rua.

Almost half of the population live in poverty, while an estimated one-in-five of the country's 36 million people are unemployed.

The peso has already lost about 70% of its value, prompting increases in the prices of fuel, drugs and groceries.

The rises have sparked almost daily protests in the streets, although not of the same scale as last December when more than 20 people were killed.

Change at the top

IMF insiders said the fund's tough stance was backed by Horst Koehler and his new deputy, Anne Krueger.

Ms Krueger is thought to take a dimmer view of bailouts than her predecessor, Stanley Fischer.

The economic team of US President George W Bush has also said it is in favour of more crisis prevention and fewer bailouts.

"I hope that now the once in our lifetime we have decided against a bailout, that we pursue it all the way," a member of the IMF's decision-making board said.

A formal announcement is not expected from the IMF until early May, after the political considerations of the board.

See also:

02 Apr 02 | Business
Argentina pleads for new aid
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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