The International Monetary Fund ended its year-long estrangement from Argentina yesterday, as its executive board approved a short-term financial aid package for the bankrupt country's government -- but with an extraordinary amount of dissent.
According to IMF sources, five members representing about 20 percent of the voting power of the 24-person board abstained from approving the $3 billion loan. The board, which approves most decisions by consensus, regards abstentions as sharp signals of disapproval, and it is rare for more than one or two members to abstain.
The abstentions were a symbolic but potent reflection of the controversy that has swirled around the aid package. It has been widely criticized as a financial sleight of hand, giving Argentina just enough loans and debt rollovers to ensure that it can pay the money it owes the IMF over the next several months.
The IMF has dubbed the package "transitional financial support" because it is aimed at tiding Argentina over until a new government can take power after an April 27 presidential election. The support includes the $3 billion loan, plus the deferral until 2004 of $3.8 billion more to "cover all payment obligations to the IMF through August 2003," the fund said.
Defenders of the package contend that it will keep Argentina, which has already defaulted on its debts to private banks and bondholders, from defaulting on its loans to the IMF -- an event that would plunge the country even deeper into international pariah status. Antipathy in Argentina toward the IMF and the international financial system risked getting out of hand, backers of the new aid package argued, if the fund continued denying new loans to the country.
In Buenos Aires, the Economy Ministry welcomed the IMF action as adding a new "element to the normalization, stability and recovery" of the crisis-stricken economy.
But privately, a number of top IMF officials and staffers chafed at the deal, which was pushed by the fund's dominant member countries, including the United States. And many independent analysts also derided it as it neared completion in the past couple of weeks. The critics complained that the international community was setting a bad precedent by caving in to threats by the Argentines to default on loans to the fund, the World Bank and the Inter-American Development Bank. Moreover, critics said, the program contemplated by the IMF won't resolve matters crucial to Argentina's long-term recovery, such as the restructuring of its ailing banking system.
The IMF directors who abstained based their actions on similar grounds, although all either declined to comment or didn't return phone calls. They included a director from Belgium who represents 10 countries, a director from the Netherlands representing 12 countries, a director from Australia representing 14 countries, a director from Iceland representing eight Scandinavian countries and a director from Switzerland representing eight countries. The voting power of IMF directors is based on the contribution the countries they represent make to the fund.
The IMF released a "program summary" stating that Argentina was pledging to "restrain monetary growth . . . to avoid inflationary pressure" and achieve a budget surplus, excluding interest payments, equal to 2.5 percent of its gross domestic product this year. Horst Koehler, the IMF managing director, said the program also "contains steps toward a banking strategy," including a strengthening of the regulatory framework for banks.
Argentina cleared its payment arrears this week to the World Bank and Inter-American Development Bank. That move, combined with yesterday's IMF action, paves the way for a resumption of loans by the development banks. The World Bank is expected on Tuesday to approve a $600 million loan to support unemployment relief in Argentina, according to a bank statement released yesterday.