Argentina, IMF Talking About Plan for Future

Argentina is negotiating a long-term plan with the International Monetary Fund that looks at fiscal and debt scenarios until 2010 in a bid to obtain new financial aid, Argentine officials said over the weekend.

The novel program is the result of an ongoing debate on reforming international financing agencies that the Bush administration has insisted on pushing forward, they said.

“The conversations are complex,” Argentine Finance Secretary Daniel Marx told reporters late Saturday.

Marx has been heading a team of negotiators in talks this month at the IMF. The talks have apparently been slowed by U.S. reluctance to back a new loan package without assurances that the measures will work this time.

The IMF said Friday that no announcement would be made on Argentina until at least today.

The South American nation is seeking $6 billion to $9 billion in fresh money to quash market fears of a default on its $128-billion public debt.

A $40-billion IMF-led credit package approved in December failed to restore investor confidence in Argentina’s solvency after three years of recession and despite drastic cuts in public sector wages and pensions.

U.S. Treasury Secretary Paul H. O’Neill, a critic of hefty IMF bailouts, said Friday that despite the December loan package Argentina was still in a “slippery position.” He questioned the use of American taxpayers’ money for further rescue bids.

In an interview with CNN, O’Neill said the IMF and other multilateral lending institutions needed to look at what they were doing and implement changes to be more effective.

“We’re working to find a way to create a sustainable Argentina, not just one that continues to consume the money of the plumbers and carpenters in the United States who make $50,000 a year and wonder what in the world we’re doing with their money,” he said.

The marathon talks at the IMF are looking at projections for fiscal deficit, debt burden and payments due through the year 2010, a member of the Argentine team said.

“We’re talking about 2010, a series of milestones that can be set up along the way that would give Argentina more support and consistency,” said the official, who asked not to be named.

“Sustainability basically has to do with fiscal balance over time, the projections on our debt in different growth scenarios and amortizations and financing requirements,” he said.

“The situation is dramatic in the short term, but in the long term it’s more manageable,” he added, speaking after a meeting Saturday at the IMF with a team of seven U.S. Treasury officials.

The talks do not include a restructuring of Argentina public debt, but could include additional bond swaps, he said.

Argentina swapped almost $30 billion in bonds this year to extend its debt payment schedule. But neither the loan package nor the swap succeeded in restoring market confidence or dispelling fears of a default and devaluation.

“We got the loan package in December. We celebrated in January, but that began to disappear in February. It lasted two months,” the Argentine official said.

“Then we did the mega-swap. It had a big effect, but in a week that fizzled out. That’s why they talk of sustainability,” he said.

Argentina said in July it would adopt a “zero deficit” policy to spend only what it earns in tax revenues, but many analysts doubt the government has the political support needed to make tough spending cuts in public pensions and salaries.

Speculation surrounding the IMF talks includes a tough set of conditions such as a monthly evaluation to prove that the zero-deficit plan is working.

Argentina has said it would use any fresh IMF funds to shore up declining currency reserves that underpin its fixed one-to-one currency peg with the dollar.