Argentina Says New IMF Loan May Take Weeks

Argentine Finance Secretary Daniel Marx said Sunday that ongoing talks with the International Monetary Fund were productive, but cautioned it could take several weeks to secure a new loan.

Marx and a delegation from Buenos Aires have spent the last three days locked in marathon meetings with IMF staffers.

The team is hoping to win support for billions of dollars in new loans from the international lender to help Argentina overcome a liquidity crisis that has threatened its solvency and raised fears of default.

Marx told reporters during an early evening break in talks expected to last into the night that negotiations centered on deepening and strengthening Argentina’s existing $14-billion IMF loan program.

He said talks would continue today, when senior IMF management, including IMF Managing Director Horst Koehler, are expected to return from vacation.

Pressed to clarify that he was seeking a new IMF loan in addition to existing credit, Marx admitted he was eventually hoping to win new money, but cautioned, “We don’t know yet.”

Talks with the Washington-based lender Friday and Saturday nearly finalized the details needed to give Argentina access to a disbursement of $1.2 billion of IMF money in August, about one month early.

The IMF is expected to announce today that it has completed the review needed to release that $1.2 billion.

Negotiations were originally set to end Saturday, but fears Argentina might default on its $128-billion debt and falling bank deposits have heightened expectations that as much as $9 billion in additional IMF loans would be sought.

Total bank deposits fell to $76.3 billion by Aug. 8 from $81.5 billion at the end of June.

Marx signaled that talks were now centered on “eventually having something more robust. We are planning to make this whole program more robust.”

Asked if a new loan would require additional reforms, Marx said already announced reforms, such as the fiscal zero-deficit plan to contain expenditures, were “extremely bold.”

“It is the same basic program that is being strengthened.”

In Buenos Aires, President Fernando de la Rua sought to downplay expectations that a new loan was imminent, telling reporters, “It’s unjustified to create expectations that on Friday, on Saturday, on Sunday or on Monday there will be announcements.”

Still, Economy Minister Domingo Cavallo said Wednesday night his negotiators “will not return empty-handed.”

Marx alluded to the challenge of winning support for new loans from IMF shareholders, most notably the United States, which has remained mute on whether it would support new loans for Argentina.

“The talks have been productive [but] it takes several evaluations and several wills to move,” Marx said.

Argentina secured a $40-billion IMF-led rescue package last December. Winning more money so soon after that package will be a hard sell, especially to the U.S. Treasury, which wants fewer IMF rescue packages.

IMF spokesman Francisco Baker declined to comment on the talks.

Along with new loans from the IMF, Marx is thought to be seeking $2 billion in backing from private banks and $1 billion between the World Bank and the Inter-American Development Bank.

But to convince the IMF to release more aid, Argentina must prove it is rooting out the problem by stopping overspending and erasing its chronic budget deficit.

Argentine bonds and stocks rallied through the week as an expectant nation pinned its hopes on fresh international aid.