IMF demands Argentina reforms

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Posted 8:20AM on Monday, April 22, 2002

WASHINGTON - Argentina, facing a deepening financial crisis, was told Saturday by the International Monetary Fund that it had to make greater efforts to overhaul its economy. The blunt assessment was relayed to Argentina's Economy Minister Jorge Remes Lenicov during a luncheon meeting with finance ministers who are members of the IMF's steering committee. IMF Managing Director Horst Koehler told reporters late Saturday that any new support by the lending organization ``needs to be built on a sustainable approach'' to the economic problems the country is facing. Koehler said Argentina's provincial governments needed to do more to restrain deficit spending. He also said the government had no choice but to shut the nation's banks on Friday because the financial institutions were facing a serious drain on deposits. The chairman of the committee, Gordon Brown of Britain, said ``the whole basis of our discussion was how could we help Argentina to get back to growth.'' A communique issued by the committee at the end of an afternoon-long meeting urged Argentine authorities ``to move quickly to reach agreement on a sustainable economic program that could receive support of the international financial institutions and provide the basis for the re-establishment of stability and growth.'' Koehler said the IMF probably would not be ready to send a team to Argentina to negotiate new loans until mid-May. Published reports have said the country is seeking around $9 billion to stabilize its finances. Remes said earlier Saturday that two obstacles were blocking his crisis-hit country from securing new rescue loans from the International Monetary Fund. Remes also said it would take 45 days to draft a plan to overhaul the banking sector, which the government shuttered late Friday as the country's economic crisis worsened. ``We are trying to construct a normal country and do what others have done in similar situations,'' he said in an address to the IMF's Financial and International Monetary Committee, according to a transcript provided afterward. ``We request your patience and understanding while we confront a situation of great volatility in the markets,'' Remes said. He said Argentina has made progress in its talks with the IMF but that differences remained over provincial spending and foreign exchange policy. The IMF suspended a $22 billion bailout package in December after Argentina, in recession for four years, missed its fiscal deficit target. The country subsequently defaulted on its $141 billion debt and devalued its currency. The IMF estimated on Thursday that the economy could contract another 10 percent to 15 percent this year. In a radio address in Buenos Aires on Saturday, President Eduardo Duhalde told Argentines to prepare for more tough times. ``We run the risk that the financial system could collapse,'' said Duhalde, Argentina's fifth president since December. The world's leading industrialized nations expressed concern about Argentina's growing financial problems and urged the country to work closely with the IMF to implement economic reforms. In their statement, the ministers from the United States, Canada, Britain, France, Germany, Italy and Japan said: ``The situation in Argentina is of serious concern. Reforms of the fiscal framework encompassing the provinces, establishing a monetary anchor and improving the bankruptcy and economic subversion laws will all help to restore investment and growth.'' It said these steps would raise the living standards of the Argentine people. ``We thus support the IMF and the work it is doing with Argentina,'' the statement said. ``We urge the Argentina authorities to work closely with the IMF to put a comprehensive reform plan into place,'' said U.S. Treasury Secretary Paul O'Neill.