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Montevideo, December 8th 2022 - 05:29 UTC



Argentina Says to Default Again on World Bank Debt

Saturday, December 14th 2002 - 20:00 UTC
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Argentina's government said it would default on more than $700 million due to the World Bank on Friday, a second missed payment that cuts the bankrupt country off from any aid from the bank.

Argentina had already let pass a first deadline a month ago, technically defaulting and ending any hope for new loans. But Friday's missed payment, which was expected, cuts off access to roughly $2 billion in existing financing that had been earmarked for AIDS programs, high schools and farm aid.

With almost all other outside credit choked off by a chaotic four-year recession, the government said it lacks the cash to pay the World Bank unless it breaks a months-long stalemate in aid talks with the International Monetary Fund.

Since November, Argentina has been in a league with Iraq and Zimbabwe as a defaulter on multilateral loans.

''If we reach a deal with the IMF, Argentina will start paying its debts again,'' Cabinet Chief Alfredo Atanasof told reporters. ''We assume the responsibility as a country ... but what we are saying is the bureaucracy at the fund has promoted the policies that put us in this situation.''

A World Bank spokesman confirmed Argentina had told the bank they would not be paying. Argentina's government said it would also miss a separate payment of about $250 million due on Monday for a World Bank-guaranteed bond.

Most Argentines have become used to the idea of the country not paying its foreign debts and financial markets shrugged off the news. The country has been more focused lately on the threat of food riots many believe are planned for Dec. 20 to coincide with the anniversary of bloody protests that overthrew a previous government.

The government already suspended payment in January on about $95 billion in debt held by private-sector creditors, marking the biggest sovereign debt default in history.

''They pay, they don't pay: at this point things can't get any worse so nobody cares,'' said Carlos Lopez, a retired auto executive who owns several small cafes in Buenos Aires. ''As a businessman, I get the feeling the worst of the uncertainty has passed so this default doesn't hit me at all.''

Reserves low

Argentina has scrambled for nearly a year to get the IMF to fork out enough money to cover debts owed to multilateral bodies through 2003. But the IMF has told Argentina to make deeper spending cuts and rally its divided politicians behind an economic plan, something Argentina has been unable to do.

''We saw this coming, but what they said about the IMF was pretty tough,'' said Hernan Fardi, an economist for local consultancy Maxinver. ''Some say this is some kind of strategy to pressure the IMF to reach a deal, but I doubt it. I think they realize it's obvious that's not going to work.''

The World Bank said Argentina was due to pay $830.7 million by the close of business on Friday. This amount includes $726 million in principal plus additional payments due and interest.

The government argues that the penalty of not paying the World Bank is outweighed by the danger of handing over $3.6 billion -- around a third of its foreign reserves -- owed to the bank in interest and principal until the end of 2003.

Categories: Mercosur.

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