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Contrary to the reasons stated by the government, the early cancellation of debt to the International Monetary Fund (IMF) did not imply that Argentina would get free of its evaluations and conditions. In these days, an IMF evaluation is conditioning the granting of loans by the IADB and the World Bank in the amount of 1.35 million dollars.

The Argentine government is waiting for the result of a new evaluation by the IMF that would allow it to be granted loans by the IADB and the World Bank. The position to be adopted by the IMF during this evaluation is complicating the approval or disbursement of six credits.

According to IMF spokespeople, the institution is expected to reiterate its doubts regarding the government’s economic policy and the operation of the economy (monetary policy and inflation), in spite of akcnowledging the merits of Kirchner’s administration with respect to economic growth, the order of public accounts and surplus.

In the case of the IADB, its Executive Board will have to evaluate on February 22 whether it approves the disbursement of a 500 million dollar credit, aimed at supporting the state’s modernization.

Yet, according to the IADB by-laws, policy-based loans can only be approved if the beneficiary country shows “a sound macroeconomic framework”, which can be determined if the recipient country has an agreement with the Fund. In case there is no such agreement, as in the Argentine case, the last Article IV consultation can be taken as reference, that is to say, the review of each country’s economy that is carried out by IMF technical experts on an annual basis.

However, this review is only valid provided it is “current”, that is to say, if less than six months have passed since its approval. In the case of Argentina, the IMF board concluded the report on June 20 2005, that is almost eight months ago, when the Economy Minister was Roberto Lavagna and nothing was yet being said about the debt cancellation to the institution.

In these cases, the IADB technical experts should request an “evaluation letter” from the Fund which shall not be replied by the Argentine representative before the institution, unlike what happens with Article IV.

With regards to the World Bank, in recent years the institution approved five credits amounting to a total of 848 million dollars aimed at supporting structural reforms, although four of them have only been partially disbursed and no money has been granted for the latter. Of such amount, 500 million are allocated to a credit of “adjustment for economic recovery” and “to help improve the investment climate”, unanimously approved by the board in June 2004, although the amount has not yet been disbursed.

The remaining 348 million account for four credits allocated to the area of health and to reforms in the sectors of education, justice and administration in the provinces of Catamarca, Córdoba and Santa Fe.

According to World Bank spokespeople, this institution should follow a path similar to the one taken by the IADB and wait for a new evaluation by the IMF.

What decision should these institutions be making if the Fund poses serious doubts on the sustainability of the Argentine programme?

According to World Bank technical experts, “since there is no agreement with the IMF, it is not possible to disburse the already approved development policy loans, and least of all could Argentine authorities be requesting new credits of this kind”. If the Bank’s board had to consider these applications again, prospects would not be favourable.

The World Bank is “controlled” by the Group of Seven (G7) – the seven most industrialized nations in the world – and maintains a close relationship with IMF technical experts. Therefore, a doubtful evaluation would constrain the possibilities of being granted more resources by that institution.

Is the IMF position, no matter if expressed in an evaluation letter, binding on the World Bank? “From the legal point of view, it is not; but from a customary point of view, it is indeed”, acknowledged a World Bank source to the Argentine newspaper La Nación (February 13, 2006).

At the IADB, in turn, the situation is different. Latin American member countries have control over 50 per cent of votes in decision bodies, and among them, Argentina and Brazil control a 22 per cent. However, the IMF evaluation and the attitude to be adopted by the United States, which has control over 30 per cent of votes at the IADB, still remain to be seen.

Within this context, the IMF is once again making its presence felt in Argentina. The early cancellation of debt was not enough to bring an end to its pressure.

Source: Diario La Nación (Argentina)

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