IMF agreement gives Argentina breathing room to get its finances in order
Argentina's accord with the International Monetary Fund gives it an opportunity to gets its financial house in order. Tuesday's agreement calls for no less than $1.2 billion in new credits this year in return for stiff austerity measures.
One of the early tasks facing President Ra'ul Alfons'in will be to develop and enforce a tax plan that will ensure that all Argentines pay their fair share of taxes. Tax evasion is a major problem. Sharp cuts in government spending will also be forthcoming in order to make a major reduction in the federal deficit.
Argentina is more than $1 billion in arrears in paying its foreign debt which is now running at $48 billion and slips $150 million more in arrears each month. Its inflation rate is soaring at more than 1,000 percent a year, and government spending has spawned a budget deficit equal to 10 percent of Argentina's gross national product.
There had been hope that the return of democracy to Argentina 18 months ago would usher in an era of fiscal responsibility. So far that has not been the case. While the civilian government has brought a sense of political responsibility and decency to the nation, the economy has, in some measure, gone from bad to worse.
International bankers who have loaned much of the money Argentina owes regard the nation as their biggest problem. Many bankers argue that of all the developing nations, Argentina ought to be most able to pay its way.
After all, Argentina has prodigious agricultural resources. Its range land produces some of the world's best beef. Its soil is rich and regularly yields huge quantities of grain. It is self-sufficient in minerals and has enough oil and natural gas for its domestic needs and could well be a petroleum exporter. But successive governments have failed to make good use of these resources.
Besides the $1.2 billion in new credits, the agreement also provides for postponement by commercial banks of $14 billion in principal payments this year and discussions of additional credits by these banks.
Another key element of the IMF accord is inflation control. The inflationary spiral that has caught Argentina for the past 15 years is to be cut to 150 percent a year by next April. Whether that is possible is doubtful. Many international financial experts doubt that it can be done. But Economy Minister Juan Sourrouille says, ``We plan to do it.'' Even halving the 1,010 percent a year rate would be a success, observers say.