MercoPress. South Atlantic News Agency

Argentina seeks agreement with IMF including “hold outs”

The Argentine government announced over the weekend in Washington that it seeks a credit accord with the International Monetary Fund and advanced it's willing to address the hold outs of the massive sovereign bonds restructuring program officially closed.

?The Argentine government aspires to attain IMF financial support for its economic programme and expects to formulate a forward-looking strategy to address the issue of the holdouts within the context of a Fund programme". The remarks were part of a joint submission to the International Monetary and Financial Committee on behalf of South American countries from Chile's finance minister and Central Bank governor Nicolas Eyzaguirre, since Chile currently represents Argentina and four other regional countries in the IMF board.

So far Argentina had refused to make any additional offer to the holdouts that last July rejected the debt-swap deal which ended the country's huge 2001/02 default and was accepted by 76% of bondholders. The announcement was made in the framework of the IMF and World Bank joint annual assembly meeting in Washington this weekend.

However Argentine Economy minister Roberto Lavagna, who received this year's award for the best Latinamerican Finance minister from the magazine Euromoney, cautioned that markets have reacted favourably to the Argentine debt restructuring "which is officially closed", adding "there's nothing else to be said besides the fact that Argentina has successfully visited money markets".

Argentine Finance Secretary Guillermo Nielsen speaking at a JP Morgan bank conference said it was "too early to elaborate" on the reopening of the debt swap since much depends on Congress, "President Kirchner no longer has special emergency powers", but "we are aware that there's a critical mass of people who held out, and did not appeal to courts".

IMF Managing Director Rodrigo Rato had advanced that Argentina needs to design a "strategy" to satisfy outstanding bondholders, estimated in 20 billion US dollars.

Last week, Mr. Rato asked the Argentine government to raise interest rates to quell an upturn in inflation, but Buenos Aires has so far given no sign that it would follow that advice. Rather Argentina's statement to the IMF said that inflation "is within the range contemplated in the 2005 budget" thanks to the government "strong fiscal performance and prudent monetary policy".

"Continued sound macroeconomics performance is, and will be, the best anchor to control inflationary expectations" added the Argentine delegation recalling that since 2002 it had repaid international financial institutions 13.5 billion US dollars, a sum "equivalent to more than 8% of its current GDP and 53% of current international reserves".

"We need an IMF agreement because we're in transition to our total indebtedness target and a partial roll over for 2006 and 2007 has become crucial", indicated Mr. Nielsen Other outstanding points of Argentina's performance included in Mr. Eyzaguirre's speech:
"Last May, Argentina successfully concluded the most complex debt restructuring program in history. This allowed the consolidation of the current economic model since mid 2002 with 12 quarters of consecutive expansion.

The consequences of the experiments of the nineties generated the 2001/2002 financial crisis, and therefore several more years of sustained growth and low inflation with prudent income policies are needed to achieve equity distribution and poverty indicators more in line with a country such as Argentina.

Solid fiscal and monetary policies supported by a competitive exchange rate have been the pillars of the current Argentine economic model".