After over a year of stalled negotiations, the G7 in mid-January strong-armed the IMF into signing an agreement that will roll over $6.6 billion of Argentina’s debt. The new agreement gives Argentina only enough money to roll over its debts to the IMF between now and August, crucially taking the country through elections called for May. The deal was supported by leading candidates of the Peronist and Radical parties, while Elisa Carrió, leader of the opposition group Alternative for a Republic of Equals, has reserved judgement until the conditions of the accord are made clear.
In return for the postponement of its payments, Argentina has agreed to implement a series of policies, including raising tax and utility rates and reforming bankruptcy procedures. The Duhalde government has rejected the IMF‘s proposals for reconstructing the collapsed banking system, but planned price hikes for gas and electricity have already been brought forward. The agreement will include fiscal targets for the provinces as well as the central government.
According to Argentine observers, a last-minute call to the Fund from the French Finance Minister, Jean Pierre Jouyet, prevented the deal from ending up on the rocks as had occurred on two previous occasions. IMF Managing Director Horst Köhler struck a cautious note, saying that the transitional program involved “exceptional risks to the Fund”. With the signing of the agreement, Argentina is able to resume negotiations with the Inter-American Development Bank and the World Bank to resume loans for social programs.