Economy & Business - August 2003

The widespread confidence that Argentina and the IMF were on course for a debt deal was jolted in mid-August when an IMF mission left Buenos Aires without agreeing a technical memorandum of understanding. The sticking points were: the level of the future primary fiscal surplus, and whether or not Buenos Aires should pay back some of the money it owes to the IMF from its central bank reserves.

The target of clinching a three-year debt rescheduling agreement by 2 September now looks unlikely to be met. If the deadline is not met, there must be a question mark against the 9 September deadline, when the temporary deal rescheduling US$2.9bn of debt expires.

Neither side looks willing to compromise on the level of Argentina's primary fiscal surplus over the next three years. The government suggests 3% of GDP next year, while the IMF wants 3.5%. Moreover, the multilateral wants a surplus of at least 4% in 2005 and 2006.

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