Argentina yesterday was racing towards defaulting on a $3.1 billion (€2.5 billion) payment due today at the International Monetary Fund, after efforts to broker a compromise between the two sides appeared stuck.
Defaulting on the loan would complete Argentina's financial isolation, placing it in a club of such pariah states as Liberia, Sudan and Somalia. South America's second-biggest economy already owes its private creditors about $100 billion after it suspended interest payments in December 2001.
Unless Argentina pays the $3.1 billion by the time US banks close today, the IMF, which signed a three-year stand-by agreement with the country last September, will cut off any further lending.
Other multilateral organisations would almost certainly follow suit. The World Bank has already postponed its country-assistance strategy, which involves lending of up to $5 billion over the next four years. Yet Argentina insists it will not pay - even with central bank reserves of about $15 billion - until it has assurances from Washington that the fund will shortly approve the second review of the country's agreement. Approval would disburse funds to cover the value of the due loan.
At the weekend, a call from Anne Krueger, the fund's deputy managing director, and a last-minute compromise plan from the US treasury failed to bring the sides closer. The conflict centres on how the government is dealing with its private creditors.
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