IMF strikes deal with Argentina

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IMF Managing Director Horst Köhler has recommended for Executive Board approval a transitional program for Argentina. The IMF said that while providing no net new financing, the arrangement would provide financial support and an extension of payment expectations to the IMF through August 2003.

The Executive Board is expected to review the transitional program in the coming days.

The policy commitments developed by the government under the new agreement with the IMF could, if implemented consistently, nurture the macroeconomic stability seen during the second half of 2002 and build a bridge to a comprehensive program to be negotiated with a successor government after the April elections. The new agreement with the IMF would also unlock funding from multilateral development banks for social programs, which are key to protect the vulnerable groups from the adverse effects of the crisis.

In a statement released after the completion of the IMF's annual assessment of Argentina's economy, the IMF said on January 8 that the country should focus on achieving a clear political consensus in favor of reforms, with a view to building a sound fiscal framework, restoring confidence in the banking sector, increasing trade openness, rebuilding legal certainty,Page 2 and restructuring debt with private external creditors.

Argentina secures breathing space

Elsewhere in the region, the IMF on January 15 approved a two-year, $2.1 billion Stand-By Arrangement for Colombia in support of its economic program through 2004. The approval makes $264 million available immediately. The authorities have indicated that they intend to treat the arrangement as precautionary. In announcing the loan, Köhler praised Colombia's "strong reform program."He noted that "the Executive Board commends the government for its rapid and determined action to address the fiscal pressures, which emerged in 2002, and develop a comprehensive strategy for stability, growth, and improved social equity."

As for Ecuador, an IMF mission is currently in Quito to hold discussions with the new economic team on a possible Stand-By Arrangement, as well as to complete a long delayed overall assessment of the state of Ecuador's economy. President Lucio Gutierrez took office on January 15, and his government is proposing a comprehensive...