Argentina Expects IMF Group to Endorse Aid

Argentina expects an International Monetary Fund mission due in Buenos Aires this week to recommend release of $1.3 billion in scheduled aid after studying a high-stakes debt swap to avert the world’s biggest sovereign default, Economy Minister Domingo Cavallo said.

Argentina is midway through a swap of as much as $60 billion in domestic debt aimed at slashing the crippling interest the government pays and heading off a debt default. Analysts said they were encouraged by news Friday that private banks agreed to swap practically all of the estimated $12.5 billion in local federal debt they hold.

“The IMF mission will recommend the pending disbursement. It’s natural that the fund wants to analyze how the debt swap is progressing,” Cavallo told the newspaper Clarin. An economy ministry spokesman confirmed the accuracy of Cavallo’s reported comments.

Cavallo told Clarin year-end public-sector bonuses would be paid in December and January, although many Argentine analysts say postponing the $1 billion in payments could be necessary if the nation is to honor IMF deficit targets.

Argentina finds itself in a quandary because the zero-deficit law it passed in July, which limits public spending to tax revenue, also requires payment of the year-end bonus, which workers and retirees there consider a part of their pay.

But in the absence of a waiver from the IMF, Argentina can obtain the $1.3 billion in IMF funds it desperately needs in December only through further budget cuts.

By Friday, 20 of Argentina’s 23 provinces had signed a federal tax revenue-sharing plan that allows the national government to reduce transfers.