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Thursday, 26 September, 2002, 22:02 GMT 23:02 UK
Argentina warned over loan threat
IMF Deputy Managing Director Anne Krueger and Managing Directory Horst Koehler ahead of Thursday's press conference.
Ms Krueger warned of 'serious consequences' for Argentina

The International Monetary Fund (IMF) has said Argentina could face grave repercussions if its chooses to default on loan payments, which it has threatened to do.

Argentine Economy Minister Roberto Lavagna
Argentina's Lavagna: Keen on getting millions in aid
IMF Deputy Directory Anne Krueger told reporters during a press conference that financial institutions would cut off humanitarian aid to the South American nation if its failed on its obligations.

"Obviously, there are serious consequences if they go into arrears on their debts," she said early Thursday morning during a news conference ahead of annual meetings of the International Monetary Fund and World Bank.

Ms Krueger said social and other programmes would have to be suspended if Argentina defaulted on its loans.

"Some of those finance part of the social safety net, and we are very concerned about that."

Human suffering

On Tuesday, Argentine Economy Minister Roberto Lavagna said his government would rather miss debt repayments than cut deeper into spending on social welfare programmes, and financing for regional governments.


All of us in the institution are deeply moved and incredibly concerned by the human suffering that there is in Argentina at this time

James Wolfensohn
World Bank president

He has argued the IMF is cutting off a lifeline just as Argentina's economy has begun to see revitalisation, citing a rise in industrial production and a drop in interest rates

But Argentina faces a uphill battle in revitalising its besieged economy, now in its fourth year of recession.

It owes the IMF, World Bank and other international lending institutions $329m (211m).

While humanitarian aid continues to flow in from some international agencies, the IMF cut off most financial support to Argentina late last year after the country defaulted on its $140bn debt.

That has meant hard time for many Argentines, who have been plunged into poverty amid the crisis as they watched their currency - the peso - lose 70% of its value.

"All of us in the institution are deeply moved and incredibly concerned by the human suffering that there is in Argentina at this time," World Bank President James Wolfensohn said shortly after Ms Krueger spoke.

Rigid policies

In taking her tough stance, Ms Krueger nevertheless said she did not think "it would be the end of the world if negotiations broke down".

US Treasury Secretary Paul O'Neill
O'Neill: Eager for reforms
That more moderate tone was reiterated by US Treasury Secretary Paul O'Neill, who spoke to reporters from Treasury headquarters in Washington on Thursday afternoon.

He said he and other Treasury officials were eager to see Argentina make reforms that would allow the way for fresh aid flow in from the IMF.

The US "and the G7 are very anxious to see Argentina's leaders to provide a basis for forward-going assistance," Mr O'Neill said.

Finance ministers and members of the Group of Seven nations are due to meet in Washington over the next three days.

Mr O'Neill said it was necessary for Argentina to resolve its issues by its own leadership and others within the country.

That theme - self determination and ownership of IMF programmes - has been voiced several times from IMF and World Bank officials.

They have been responding to criticism that the world-lending institutions are too rigid in their lending policies, prescribing an inflexible one-size-fits-all remedy for needy nations.



Developing countries

World economy
See also:

25 Sep 02 | Business
23 Sep 02 | Business
24 Sep 02 | Business
19 Sep 02 | Business
19 Sep 02 | Business
24 Sep 02 | Business
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