Press Release No. 03/06

Press Release: IMF Managing Director Issues Statement on Transitional Credit Support for Argentina

January 17, 2003

Mr. Horst Köhler, Managing Director of the International Monetary Fund (IMF), confirmed today he is recommending to the IMF's 24-member Executive Board approval of transitional financial support for Argentina.

In transmitting to the Executive Board the Argentine authorities' letter of intent and memorandum of economic policies, which is included in the IMF staff report for the transitional program in 2003, Mr. Köhler made the following statement:

"The Article IV discussion on January 8 demonstrated the complexity of the situation in Argentina as we — staff, management and the authorities — have strived to secure a policy framework that achieves durable macroeconomic stability, supports the resumption of growth, and improves the investment climate. The appraisal in the Article IV consultation report is candid in stressing that difficulties in securing a political consensus in Argentina have been a core problem impeding progress toward a program. That said, we all take note that, in recent months, the economic situation has somewhat stabilized, though it remains fragile.

"The government has now developed a series of policy commitments that could, if implemented consistently and credibly, build a bridge to a comprehensive program to be negotiated with a new government after the elections. These policies provide the basis for a transitional program that will seek to preserve macroeconomic stability through the course of the upcoming elections and reduce the risk of policy reversals. Equally important, this program will also provide a framework for the multilateral development banks to support social programs in Argentina, which are key to protect the vulnerable groups from the adverse effects of the crisis.

"But even a transitional program involves exceptional risks to the Fund which are outlined with appropriate care and depth in the staff report. They relate to the fragility of the macroeconomic policy framework and the political challenges to implementation. In considering this request, it is important that the Board weigh these risks carefully, and their implications for Argentina, the region, and for the Fund itself.

"I have decided to recommend the approval of this arrangement as a demonstration of a good faith effort of the international community in favor of the people of Argentina. I would also like to assure the Argentine people that the Fund will do its part to make this program succeed. The key to a durable solution to the present difficulties lies, of course, in the actions that Argentina takes. I hope that our contribution will catalyze a cohesive effort on the part of the Argentine authorities, the provinces, legislators and civil society to fully implement this transitional program."