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IMF Approves Controversial $6.8B Loan for Argentina - 2003-01-25

The executive board of the International Monetary Fund Friday approved a controversial $6.8 billion loan for Argentina that will allow the cash strapped South American country to avoid further default on its foreign debt.

The loan gives the Argentina a breathing space while a new president is elected and the authorities seek to reactivate a stalled economy. The IMF calls this emergency loan transitional financial support and not an approval of recent economic moves by Argentina.

Buenos Aires defaulted on much of its huge foreign debt in December of last year. An ensuing financial crisis thrust the country into its worst post-world war two recession. The economy shrank by a stunning 12 percent last year. Elections are planned with a new president due to take office in May.

Argentina's current president says he is unhappy with the IMF despite the new loan. He told the La Nacion newspaper that the IMF failed to help during Argentina's worst time in history.

Financial analysts say the new loan will allow Argentina to avoid default on its loans to the IMF and safeguard its shrinking foreign exchange reserves. Argentina's troubles are blamed on a chronic failure to rein in government spending and an overvalued exchange rate. The one to one currency peg with the dollar was abandoned 13 months ago and borrowers were unable to pay back their foreign loans.