Argentina Calls Nationwide Bank Holiday : Alfonsin to Announce Anti-Inflation Program

Argentina’s central bank on Thursday ordered all banks closed today, paving the way for an announcement of drastic economic reforms designed to hold back inflation and comply with International Monetary Fund recommendations.

The central bank declared today a “bank holiday,” meaning all transactions will be halted, apparently to head off massive withdrawals of deposits in view of economic uncertainty and financial jitters.

It also ordered, without effect, the liquidation of Banco de Italia, Argentina’s third-largest private bank that went bankrupt last month, the official news agency Telam said. Instead, Banco de Italia was put under “intervention,” meaning it will once more operate under government supervision.

Economic Package

President Raul Alfonsin scheduled an address for tonight, when he is expected to give more details on his economic package.

With the aid of a $20-million rescue package from foreign and private banks, the central bank is expected to reopen Banco de Italia next week.

Presidential spokesman German Lopez said the government will announce a stringent anti-inflation plan today that will include “all the steps necessary to be taken.”

Asked about a news report that there will be a price and wage freeze, Lopez replied: “I do not believe there has yet been a decision, but I would not rule this out.”

On Tuesday, the central bank devalued the peso by 18%, a break with the past pattern of “mini” devaluations of 1% a day, to boost exports and comply with recommendations of the IMF to control inflation in the country, which has a $48-billion debt, the world’s third largest.

Further Devaluation

A further devaluation of 2% Wednesday triggered a surge in the black market peso rate, from 855 pesos to the dollar to a peak of 1,000. The official rate for the peso is 783.06.

A government central banking official denied a news report that the central bank will issue a new monetary unit called the “argentino” to replace the peso.

Business sources said they believe a government “shock plan” to control inflation, now running at a rate of 1,010% a year, has already been decided upon.

Argentina also paid $250 million in overdue interest Wednesday while it negotiated for a bridge loan from the United States and other countries to help pay its interest arrearage of about $1 billion to the international banking community.

Wednesday night, the government announced the money supply, inflation and spending targets negotiated last week with the IMF that will release a frozen $1.2-billion standby credit that will in turn release a pending loan of $4.2 billion from private international banks.

Under the agreement, Argentina must reduce inflation to 8% a month from 25% by March, 1986; keep salaries to 90% of the inflation rate, as previously announced by the government, and lift price controls.