Saturday April 28 10:11 PM ET
Argentina Within Days of New IMF Deal

By Hugh Bronstein

WASHINGTON (Reuters) - The International Monetary Fund said on Saturday it was within days of finalizing an agreement with Argentina that would ensure the nation has continued access to billions of dollars of much needed aid.

International Monetary Fund Managing Director Horst Koehler said new economic policies from Argentina's Economy Minister Domingo Cavallo were ``an important and decisive step to boost confidence, consistent with the objectives the IMF-supported program that is in place.''

``It is expected discussions on the economic policies will be concluded within the next few days,'' the IMF head said.

The IMF and Argentina have been renegotiating their economic program after the Latin American economy missed a vital fiscal target, which was a condition under an IMF-led $40 billion rescue package agreed to in December.

Since Argentina missed the IMF-mandated fiscal target during the first three quarters of the year, fears have resurfaced in financial markets that Latin America's largest borrower could default on its debts.

Cavallo, the dynamic economy chief who says he can spur growth before year's end after 33 months of malaise, told reporters at the IMF's spring meetings here that, ``In principal, everything is approved.''

Cavallo declined to announce the government's new fiscal targets under the revised program. ``I can't go into those details. They will give you the details probably on Monday or Tuesday once they finish the paperwork.''

Cavallo said the revised program will not include any new fiscal measures beyond the tax and spending proposals he announced on Friday. The proposals are aimed at steering Argentina's public finances back on track to meet a $6.5 billion year-end deficit agreed to in December.

``We will get the disbursements of the funds that were committed by the international institutions in December and that will allow us to work normally and solve our problems,'' said Cavallo.

While the year-end deficit target is expected to remain at $6.5 billion, the revised plan was expected to alter quarterly targets to give breathing room in the near term.

Koehler said Cavallo's economic plan along with a commitment to Argentina's exchange rate regime, which pegs the peso one-to-one to the U.S. dollar, ``should provide a strong basis for a sustained recovery of the economy.''

Claudio Loser, head of Latin America at the IMF, said the reshuffling of the fiscal targets was the only unresolved issue.

Cavallo, armed with special emergency powers enabling him to bypass the legislature, on Friday said he will slash the sales tax on capital goods, cancel some tax exemptions and hike a financial transaction tax.

The measures, to go into effect on May 1, are part of Cavallo's plan to pull Latin America's No. 3 economy out of nearly three years of recession and stagnation.

Cavallo also met Saturday with U.S. Treasury Secretary Paul O'Neill to outline the government's program. O'Neill called Cavallo's plan ``wonderful'' and said Cavallo made no new financing requests.

``He's just a dynamo that keeps going,'' O'Neill said.

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