MercoPress. South Atlantic News Agency

Conciliatory signs

International Monetary Fund Managing Director Horst Koehler said this Friday in Berlin that the IMF is committed to reach an agreement with Argentina.

Mr. Koehler's remarks follow Argentina's decision to make a partial payment (only interest) of a World Bank loan that was due this week leaving the country in the brink of default with multilateral credit organizations.

Mr. Koehler insisted that there has been progress in the negotiations that actually begun last February.

"We're working with them. We believe we've advanced and there's the commitment to reach an agreement, but obviously the essential must happen in Argentina", said IMF Managing Director who declined to comment on Argentina's decision not to make the capital payment of an 805 million US dollars after negotiations with the IMF stalled.

Argentina argued that it couldn't pay because a monetary policy understanding with the IMF impedes the country from having international reserves below the 9 billion US dollars benchmark.

On Thursday Anne Krueger, First Deputy Managing Director of the IMF and who is leading the extenuating negotiations with Argentina in a short statement said that further progress had been made with Minister Roberto Lavagna and his team this week.

"In particular, we have broadly agreed on the sequencing of an initial banking strategy and that there will be no further mandatory stays to the application of the insolvency law. The authorities have also agreed to seek the necessary consensus with the political leaders. There are, in addition, still some issues that remain to be resolved for the emerging program, affecting the monetary anchor, the federal and provincial fiscal framework for 2003, and the pricing and regulatory framework of the utilities. We expect discussions will continue in the coming days. The authorities have requested an extension of the Supplemental Reserve Facility expectation falling due on November 22 and management is preparing to recommend such an extension for the approval of the Executive Board. IMF management continues to coordinate closely with the managements of the World Bank and the Inter-American Development Bank on the dialogue with Argentina."

In Buenos Aires caretaker president Eduardo Duhalde playing an optimistic chord confirmed he had convened all governors and leaders of Congressional groups for a meeting to discuss the acceptance of the IMF technical proposals and political support for the long expected agreement.

However Home Secretary Jorge Matzkin more bluntly said "we are under the impression that each time we're ready to sit down, they pull the chair aside".

According to Argentine sources the main points demanded by the IMF are: ? Executive branch must be banned from dictating tax moratoriums and ratification of no further suspension of repayments by financial system debtors. ? Quick approval of the 2003 budget, agreed with the IMF, contemplating a primary surplus equivalent to 2,5% GDP (increase from the original 2,2%) ? Immediate approval by provincial legislatures of budgetary restrictions. ? Utilities rates increase (IMF insists in 30%, Mr. Lavagna 10%).