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NewsMine economy latin-america Viewing Item | Imf policy promoted poverty in argentina { December 15 2005 } Original Source Link: (May no longer be active) http://news.ft.com/cms/s/552dd786-6dad-11da-a4df-0000779e2340.htmlhttp://news.ft.com/cms/s/552dd786-6dad-11da-a4df-0000779e2340.html
Argentina to pay off its IMF loans By Adam Thomson in Buenos Aires Published: December 15 2005 17:15 | Last updated: December 15 2005 20:52
In a clear shift in macroeconomic policy, Argentina on Thursday announced it would pay off all its existing loans with the International Monetary Fund, promising an end to one of the most bitter and controversial relationships entered into by the Washington-based financial institution.
Speaking to business and union leaders, military representatives and human rights activists, Néstor Kirchner, Argentina’s president, said the IMF had “acted towards our country as a promoter and a vehicle of policies that caused poverty and pain among the Argentine people”.
Mr Kirchner had sought to blame the IMF, rather than past Argentine governments which made sovereign decisions, for the country’s problems, a strategy that has been popular at home.
Argentina’s decision to break ties with the Fund comes after Mr Kirchner replaced Roberto Lavagna, his economy minister, with Felisa Miceli this month. Mr Lavagna had announced shortly before he was relieved of his post that he intended to enter talks with the IMF over a new agreement.
Rodrigo Rato, IMF managing director, said: “I welcome Argentina’s repayment of its outstanding obligations to the Fund. The decision has been taken by the government in accordance with its rights as any normal member of the Fund and reflects their confidence that their external position is sufficiently strong to warrant early repayment”.
The decision, which comes just two days after Brazil said it would repay all its outstanding loans with the multilateral agency, involves repaying $9.8bn by the end of this year.
While the IMF is likely to be pleased to get its money back, and to end the stand-off with Argentina, the repayment by two large borrowers raises fresh questions about how the Fund will pay for its operations at a time of low demand for its loans.
Argentina’s foreign reserves rise to almost $27bn from a low of about $8bn shortly after the country suffered its worst economic crisis in December 2001.
Paying off the fund in short order will leave Argentina with fewer reserves and potentially more vulnerable to swings in international investor sentiment.
Ms Miceli, Mr Kirchner’s new economy minister, said that the decision would leave Argentina with“sufficient reserves to support the monetary base”, and added that it was possible thanks only to the country’s strong economic position. She said that paying back the IMF would save the country more than $800m in interest payments.
Since Argentina fell from grace nearly four years ago, it has experienced a strong economic recovery that few experts predicted. Growth since 2003 has been around 9 per cent a year, exports have risen to record levels and the primary fiscal surplus is expected to hit about 3.7 per cent this year.
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