Argentina clears entire $14b IMF debt

Argentina has canceled its entire $14 billion debt to the International Monetary Fund - cutting itself free from the Washington-based lender after years of bitter clashes.

"This is the start of a new phase," a smiling Economy Minister Felisa Miceli told reporters after the transaction yesterday.

Argentine President Nestor Kirchner said on December 15 the Government would use nearly a third of its foreign reserves to wipe out the remaining IMF debt.

Argentine leaders say the early payback gives the Government more freedom to carry out economic policies that have not always met with the fund's approval.

An IMF spokesman declined to comment on the payment, a logistical feat that central bank Governor Martin Redrado described as the "the central bank's most important and complex transaction in its 70-year history".

The payment involved funds transfers to 16 different central banks worldwide, he said.

Kirchner, a left-leaning Peronist who took office in May 2003, has attacked the IMF for funding what he calls the failed free-market policies of his predecessors.

Argentina's relations with the IMF soured badly after its 2001-02 economic crisis that plunged millions into poverty. The IMF sent a rescue package to then-President Fernando de la Rua as the nation's economy teetered on the brink of collapse.

Argentina will save $1.16 billion in interest payments, Kirchner has said. But analysts note the country pays double the interest by tapping funds from international capital markets.

Argentina, Latin America's third-largest economy, has been a key player in international debt markets for decades, first due to its heavy borrowing in the 1990s and then for declaring the biggest sovereign default in modern history in 2002, at the height of a devastating financial crisis.

The country still has $16 billion debt with other lenders including the World Bank and the Inter-American Development Bank.

- REUTERS