After One Year of Negotiations, Argentina Agreed With IMF

Both parties signed the Letter of Intent in Buenos Aires. Argentina paid almost $1 billion.
As anticipated by PRAVDA.Ru on its article "IMF to seal a transitional agreement with Argentina by mid January", the International Monetary Fund agreed new terms on country's short-term loans. The roll over deal will postpone payment settlements until August, but will mean no cash for Buenos Aires.

The roll over deal is for a total amount of $ 11.7 billions. To agree with the IMF, Argentina had to secure it will meet a $1bn debt payment, avoiding a potentially damaging default. Although it will mean no new cash, the move paves the way for the refinancing of $6.6bn owed to the fund between now and August.

Negotiations were in a deadlock on Wednesday when the local Government refused to pay a loan to the Inter-American Bank for Development -BID by its initials in Spanish- at the rate of $ 680 millions. However, both parties reached an agreement Thursday morning during a meeting at the Economy Ministry in Buenos Aires. Argentina decided to pay and the IMF to roll over next payments.

Negotiations started one year ago, after Argentina defaulted on its foreign debt hold by private investors. However, kept on paying to the IMF and the World Bank until September. By that date refused to keep on using its weakened reserves to meet foreign obligations and forced IMF authorities to discuss the issue.

The IMF looked very reluctant to even agree a short-term deal as the one signed yesterday. Anne Krueger, number two of the organism, represented the hard line. However, the G-7 urged the IMF to agree with Argentina by Christmas and the directors of the Fund gave up.

President Eduardo Duhalde said the deal would help his country protect its financial reserves and keep "stability on the horizon". However, the next Government will have to re-negotiate terms with the IMF as this is only a transitional deal, which only delayed payment settlements, but do not resolve country's financial crisis.

Analysts consulted by this correspondent say that in the short-term, the agreement is irrelevant for Argentina, as the economy recovering had to come with or without foreign assistance. However, represents the normalization of Argentina's relations with the international community and can reinforce economic growth.

Photo (Prensa Economica): Local authorities and IMF officers sign the Letter of Intent at the Ministry of Economy in Buenos Aires.

Hernan Etchaleco PRAVDA.Ru Argentina

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