MercoPress. South Atlantic News Agency

IMF and Argentina begin “long distance” talks

Argentina faces crucial budgetary challenges in spite of having achieved a strong fiscal relief with the restructuring of its public debt, said IMF Managing Director Rodrigo Rato and stressed that IMF is willing to aid Argentina.

Mr. Rato added that Argentina's total debt currently represents 78% of GDP and above Latin America's and this is a "very important challenge". When asked if the IMF was prepared to sign a new agreement with Argentina Mr. Rato said the initiative belongs to the Argentine government. "Argentina has made a tremendous effort to get out of a very difficult situation. But they still have a lot ahead and we are willing to help", indicated Mr. Rato.

Argentine president Nestor Kirchner who has been extremely critical of IMF is longing for an understanding which can help refinance Argentina's commitments to the multilateral organization and for which the country has genuine resources.

Argentina is anticipating a primary budget surplus of 3,2% of GDP, of which 3% to pay for public debt.

Last February Argentina concluded a bond swap involving 102 billion US dollars and managed to attract 76% holders of defaulted sovereign bonds, in spite of the significant cuts imposed on the new issues.

IMF and G 7 countries have been demanding that Argentina reach a "realistic" understanding with the remaining 24% of bond holders which have approximately 20 billion US dollars in sovereign bonds.

Argentina has repeatedly replied that it will address the issue "at its time" and following the procedure for the whole swap operation.

Argentina's Finance Secretary Carlos Mosse said that he doesn't believe a quick agreement can be reached with the IMF and admitted "we're holding talks, but patience is also needed". "In the coming 30, 60 days we'll have something to say", said Mr. Mosse adding he was optimistic about the development of events. "For almost a year we've been re-paying international credit without having received any fresh funds; and this be so as long as we can have the sufficient funds", but cautioned that there are financial alternatives to the multilateral organizations.

"The earliest date to complete an agreement with the IMF could be end of July or early August" estimated Claude Loser a former IMF economist. "I would imagine Argentina would like an IMF agreement covering 75% of repayments until mid 2007, with longer periods and lower rates", added Mr. Loser. Apparently this involves capital and interest totalling between 6,4 and 11 billion US dollars. But according to the Argentine press, IMF will be closely scrutinizing the "sustainability" of the country's debt and "contingent liabilities" emergent from the 20% remaining bondholders who did not accept the bond swap, plus claiming the still pending and promised "structural reforms" agreed.