IMF turns up heat on Argentina

Tony Smith, Associated Press, Argentina

The International Monetary Fund turned up the heat Tuesday on debt-ridden Argentina, saying its current economic policy was unsustainable.

Speaking in Washington, the Fund's chief economist, Kenneth Rogoff, told reporters "it's clear that the mix of fiscal policy, debt, and the exchange rate regime is not sustainable."

Hobbled by a four-year recession that has sparked deflation, spiraling unemployment and an 11 percent drop in industrial production in November over a year earlier, Argentina is struggling to pay off its US$132 billion debt.

The IMF earlier this month held back $1.3 billion after Argentina failed to meet previously agreed upon budget deficit targets.

Rogoff did not criticize any specific policy and said the mix was "the subject of ongoing negotiations" with Argentina.

"Everyone recognizes that to a large extent the problem lies in Argentina," he said.

There was no immediate comment from the economy ministry.

But Finance Secretary Guillermo Mondino said in neighboring Uruguay that Argentina desperately needed IMF support for an upcoming debt swap.

"If the IMF does not support (the swap), it won't be successful," Mondino said in a speech ahead of a meeting of the four-nation Mercosur trading bloc. "It's clear that if we don't have an orderly debt restructuring, we're dead meat," he added.

The second, international phase of restructuring Argentina's $132 billion debt is slated for late January and should be over in February.

Failure to renegotiate would likely result in a default and economic chaos in South America's second-largest economy.