Press Release No. 04/51

Press Release: IMF Acting Managing Director to Recommend to the Executive Board the Letter of Intent of the Authorities for the Second Review of the Stand-By Arrangement for Argentina

March 10, 2004

Ms. Anne Krueger, Acting Managing Director of the International Monetary Fund (IMF), today made the following announcement:

"IMF staff have reached agreement with the Argentine authorities on a letter of intent requesting the completion of the second review under Argentina's three-year Stand-By Arrangement from the Fund. The letter of intent has been signed today in Buenos Aires by Minister Lavagna, Finance Secretary Nielsen and Central Bank President Prat-Gay, and will be sent shortly to the IMF's Executive Board. I plan to recommend to the Executive Board the completion of this review along with the associated financing assurances review. I anticipate an Executive Board meeting later this month. Completion of the review will entitle Argentina to a disbursement of the equivalent of SDR 2.1 billion (about US$3.1 billion).

"The authorities' letter notes that considerable progress has been made in implementing their economic program which has been supported by the Stand-By Arrangement approved by the IMF in September 2003. The economy is recovering rapidly and the disciplined implementation of monetary and fiscal policies has contributed to strengthening confidence, reducing inflation, lowering interest rates, and rekindling private investment. All end-December 2003 quantitative policy targets were met with wide margins and policies remain on track towards meeting the end-March 2004 targets. In particular, buoyant tax revenues and firm control over spending have resulted in larger than programmed fiscal savings in 2003.

"The letter of intent develops the macroeconomic framework for 2004 and elaborates on the structural policies that would sustain the ongoing recovery. The macroeconomic framework anticipates growth in 2004 of about 5½ percent, higher than originally projected. Inflation should remain in the single-digit range while the central bank's reserve position is expected to strengthen further. Regarding structural reforms, the letter of intent develops further the authorities' strategy for advancing key fiscal structural reforms, strengthening the banking system, and moving ahead with reforms in the utilities sector.

"The letter of intent also elaborates on the authorities' strategy for sovereign debt restructuring. In particular, the authorities outline the main elements of their approach aimed at reaching a collaborative agreement with creditors that will result in a sustainable debt for Argentina. The authorities will work with the assistance of investment banks to establish a timetable and process that will ensure meaningful negotiations with all representative creditor groups. Toward this end, the authorities intend to finalize shortly a decree that will give full legal status to the appointment of investment banks."