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IMF passes $7.2 billion credit deal for Argentina

WASHINGTON: The International Monetary Fund gave Argentina's economic policies its seal of approval on Friday with a $7.2 billion lending deal, but said the Latin American country had no plans to tap the cash.

The three-year standby loan, approved by the IMF board after an afternoon meeting, replaces a previous credit worth some $2.8 billion.

"The Argentine authorities have indicated that they intend to treat the credit as precautionary," the IMF said in a statement announcing the deal.

The standby credit will give Argentina financial support if things go wrong or if the country is hit by factors outside its control.

"The new Argentine government has embarked on a strong economic programme aimed at promoting the recovery and sustained growth of the economy, with continued price stability, and an external current account maintained within financeable limits," said IMF Acting Managing Director Stanley Fischer.

In a letter to the IMF published last month, Argentina promised a string of reforms designed to prevent its economy from sliding back into recession or going deeper into debt.

The two sides forecast economic growth averaging 4 percent over the coming years, including 3.5 percent this year.

Fischer said the strengthening of Argentina's public finances involved expenditure restraint, a significant additional tax effort, and measures to strengthen tax administration.

"The authorities have moved decisively in these areas and most of the envisaged measures under the programme are already in place," Fischer said.

Argentina promised to keep its 2000 central government budget deficit to $4.7 billion, and to aim at a balanced budget by 2003.

Big budget gaps have been Argentina's main economic problem in recent years, scaring off investors and hurting the country's prospects.

The loan is one of the 10 largest in the 55-year history of the IMF. But it is much smaller than the multibillion dollar credits the IMF extended to Brazil, South Korea and Indonesia during the world economic crisis of 1997-99.

The fund has come under pressure in recent months to reduce its lending, concentrating on short-term emergency funding for countries facing balance of payments problems.

Fund staff and countries receiving the loans say long-term credits like the one now extended to Argentina provide an IMF thumbs up markets, showing that the IMF is satisfied with economic policies.-Reuters