News Brief No. 01/81

News Brief: IMF Managing Director Prepared to Recommend Addition of US$8 Billion to Argentina's Stand-By Credit

August 21, 2001

Mr. Horst Köhler, Managing Director of the International Monetary Fund (IMF), today informed the Fund's Executive Board that he is prepared to recommend an augmentation of Argentina's current stand-by credit (see Press Release No. 01/3) by approximately US$8 billion to about US$22 billion from the present US$14 billion.

"Of the total amount that would be added to the current stand-by credit, approximately US$5 billion would be made available upon Executive Board approval of the augmentation, and the balance of US$3 billion would be added to future disbursements under the program," Mr. Köhler stated. "The authorities are also considering the possibility of a voluntary and market-based operation to increase the viability of Argentina's debt profile. As these discussions bear fruit, IMF Management would be prepared to recommend bringing forward the remaining US$3 billion under this augmentation to support such an operation."

The Argentine authorities have committed to strengthening fiscal adjustment, and to ensuring that the fiscal adjustment is sustainable over the medium term, through full implementation of the "zero-deficit" law approved by the Argentine Congress on July 29. An important undertaking in the program is the introduction of legislation to reform Argentina's revenue-sharing arrangements with the provinces, which have been a significant source of rigidity and inefficiency in public finances.

A strengthening of tax administration by the authorities is expected as part of Argentina's aggressive efforts to address fiscal imbalances. Other reforms under the government's program include measures in the reform of the state and the strengthening of the public banks.

The Executive Board is expected to consider the augmentation in early September when it conducts its review of Argentina's performance under the current arrangement (see News Brief 01/71).