MercoPress. South Atlantic News Agency

Uruguay cancels all debts with the IMF

Uruguay has paid off its full debt of some 1.09 billion US dollars to the International Monetary Fund, “which will grant the country greater financial autonomy” according to Central Bank sources.

Uruguay follows the footsteps of its larger Mercosur neighbours Brazil and Argentina, which both cancelled their IMF debts within the last twelve months.

"The sum was paid electronically late Thursday using payment reserves that were deposited in 14 central banks" said the source. The funds were sent to banks in Chile, Mexico, Canada, Thailand and other countries.

Earlier this year, Uruguay made payments to the IMF worth some 1.55 billion, thanks in part to nearly 3 billion in dollar-denominated bonds issued since the country's centre-left government took power in March 2005. Last month, Uruguay completed a swap of dollar-denominated instruments worth almost 1.2 billion to improve its debt maturity profile.

In early November the administration of President Tabare Vazquez announced it would cancel all pending debt with the IMF and that it would not sign a new stand by agreement with the multilateral financial organization with seat in Washington.

Uruguay's international reserves totalled 3.78 billion on November 29.

In 2003, at the height of a deep recession that began four years earlier and deepened when the Argentine economy melted in 2001/02, Uruguay executed another swap for nearly half of its debt obligations to avoid defaulting.

However following the swap the Uruguayan economy expanded steadily and the government expects economic expansion to reach 7% or more in 2006, marking its fourth consecutive year of growth.