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Argentina's Floating Exchange Rate Begins Monday - 2002-02-06

Argentina's economy minister says foreign exchange markets will not open until next Monday to give the Central Bank more time to draft new regulations for letting the peso float freely. The government this week was supposed to end Argentina's dual exchange rate system, which it imposed last month.

Economy Minister Jorge Remes Lenicov says the new floating exchange for the peso will not go into effect until Monday. Mr. Remes told reporters Wednesday, even though the government announced the new exchange rate regime on Sunday, the Central Bank needs more time to draft new regulations.

In January, President Eduardo Duhalde's government set up a dual exchange rate system for the peso, which until then had been pegged one to one to the U.S. dollar since 1991. The Argentine government established the twin exchange rate system to ease the pain of devaluation. However, the policy was criticized by International Monetary Fund officials who said such dual currency regimes are unsustainable.

Economy Minister Remes expressed hope Wednesday that, with the new floating currency and the government's austerity budget that was introduced Tuesday, the IMF will agree to grant Argentina an emergency loan. Argentina is seeking to borrow an additional $15 billion.

"Once a loan agreement is reached, Argentina can move forward on plans to resume payments on its public debt," he said. Argentina defaulted on its $141 billion debt in December.

Argentina devalued its currency and stopped debt payments because of a financial crisis that led to the resignations of two Presidents in December following widespread protests. Protests have continued against President Duhalde, who took office on January 1, because his government continues to maintain some restrictions on withdrawals of bank deposits. These restrictions were first imposed in early December by former President Fernando de la Rua to stop a run on the banks, as Argentines became fearful of losing their savings.

Because of the peso-dollar parity that had existed since 1991, almost two-thirds of Argentine bank deposits were denominated in dollars. But the Duhalde government has said this money will be returned in devalued pesos because there are not enough dollars in the country.

Economy Minister Remes said Wednesday even though many bank withdrawal restrictions have been eased, certain limits would be maintained for now. Mr. Remes said they will be lifted when as a measure of "certainty" returns to the economy.