Letter to the Editor: A Way Forward with IMF’s Dispute with Debt Laden Argentina

This article appeared in the Financial Times, February 3, 2004.
Sir, Alan Beattie’s reportage on the back and forth between the International Monetary Fund and Argentina has, among other things, identified the players and their positions.

On January 29 (“IMF in revolt on releasing loan to Argentina”), Mr Beattie reported that the IMF would “roll over” Dollars 350m in IMF loans despite dissent from about a third of the IMF’s governing board. Mr Beattie has also detailed Anne Krueger’s beef with President Nestor Kirchner’s take-it-or-leave-it offer to foreign bondholders of a 90 per cent haircut (“Argentine-IMF rancour starts to turn personal”, January 30).

But Ms Krueger, a dogmatic floater and promoter of Argentina’s default on its convertibility pledge, has condoned the 65 per cent haircut Argentines have taken on the government’s currency liabilities. Parity for the government’s other liabilities in default - its foreign bonds - would probably smooth Ms Krueger’s ruffled feathers and give debt negotiations a much-needed reality check. She should answer Mr Kirchner’s 90 per cent figure with a 65 per cent counter-offer, if only for consistency. This would leave Argentine creditors with about the same deal that Yugoslavia’s creditors received when the Paris Club restructured Yugoslavia’s debt.

Steve H. Hanke,
Senior Fellow,
The Cato Institute,
Washington, DC 20001, US

Senior Fellow Steve H. Hanke is a professor of Applied Economics at the Johns Hopkins University in Baltimore.