Argentine president Nestor Kirchner announced Thursday the decision to cancel in advance the country's debt with the International Monetary Fund, IMF, 9.8 billion US dollars which will be financed with international reserves from the Central Bank.
"The decision means Argentina will make the payment effective before the end of the year appealing to the Central Bank's surplus", said President Kirchner from Government House, Casa Rosada. He also emphasized the decision will have a "neutral monetary impact" since the bank's reserves total 27 billion US dollars, double the 2003 level.
Mr. Kirchner added that Argentina will save almost a billion US dollars in interest payments. The IMF payments timetable is 5.08 billion US dollars in 2006; 4.63 billion in 2007 and 432 million US dollars in 2008.
"This will help create a reliable economic climate and confirms the administration's policy to cut the overall debt, recovering freedom for national interest decisions", stressed Mr. Kirchner who nevertheless added that Argentina's initiative "must not be interpreted as an obstacle to continue claiming the restructuring of the IMF".
"We are demanding the IMF honour the purpose for which it was created; Argentina will now be in a position to demand these reforms with even more determination".
IMF Managing Director, Rodrigo Rato praised Argentina's decision and said the organization was willing to help the country address the economic challenges it faces.
"I welcome Argentina's repayment of its outstanding obligations to the Fund. The decision has been taken by the government in accordance with its rights as any normal member of the Fund and reflects their confidence that their external position is sufficiently strong to warrant early repayment.
"Important challenges and opportunities lie ahead for Argentina and the Fund looks forward to maintaining a productive relationship with the authorities. We remain ready to assist the Argentine authorities in any way that would help them address these challenges," he said.
According to the IMF total drawings by Argentina under the three Stand-By Arrangements were equivalent to SDR 16.102 billion (about US$23.2 billion) out of a total of SDR 28.092 billion (about US$40.5 billion) that were made available under the three arrangements.
However Buenos Aires analysts point out that the IMF statement is not as enthusiastic as that on Brazil, which earlier this week also announced the decision to cancel in advance pending debt with the IMF.
In Brazil's case Mr. Rato spoke of the country's extremely and "growingly strong international position" and again praised the performance of the Brazilian orthodox approach regarding, inflation, exchange rate and interests.
IMF believes Argentina has pending tasks with inflation, the financial system and energy sector. Mr. Rato recommended Buenos Aires to follow the "Brazilian example".
Earlier in the day the Argentine Statistics and Census Office revealed that the Argentine economy expanded 9.2% in the third quarter compared to a year ago and 2,3% over the second quarter.
Fixed gross investment also surged 23,1% compared to the same period a year ago. Argentina is forecasted to end 2005 with overall growth ranging between 8.2 and 8.5%