Buenos Aires on Tuesday repaid its debts to the International Monetary Fund (IMF) in a move that President NŽstor Kirchner said would allowArgentina to regain its economic independence.
Payment was made by order of Argentina's Central Bank from Argentine deposits in Basel's International Payment Bank and the US Federal Reserve Bank. In that transaction, the IMF received some $9.513 billion, which, added to interest payments made last week, bring the total to $9.574 billion.
The debt payment had been previously scheduled to be made through 2008, authorities said. Argentine Economy Minister Felisa Miceli dismissed some officials' worries that the early payment might cause financial turbulence, saying Argentina had sufficient reserves to fight any external shocks.
The pledge to tap Argentine reserves to pay the debt came last month shortly after Brazil announced it too would repay its full $15.5 billion debt to the IMF. But the idea of early repayment has divided Argentines. Some backed the president's effort
to free his country from IMF oversight, while others said he should use the money to help Argentina recover from the devastating 2001-2002 economic crisis.
Government leaders in Buenos Aires said canceling the debt would allow Argentina greater autonomy in setting its economic policies. Since winning office in 2003,
the Kirchner administration has often clashed with the IMF, resisting many of the lending agency's economic policy recommendations. Nonetheless, the government chose not to end its membership in the IMF, fearing such a move would scare investors.
Argentina's currency reserves now stand at $18.5 billion after the debt repayment, a level that was more than sufficient to ensure financial stability, according to the president of the central bank, Martin Redrado.
Felisa Miceli did not rule out the possibility of using the reserves again in the future to repay Argentina's remaining $16 billion debt to other multilateral lenders, including the World Bank and the Inter-American Development Bank.
Buenos Aires' stock market rallied sharply at opening on Tuesday and trading was brisk, in contrast to the negative reaction December 16, a day after President Kirchner announced the decision to "declare independence" by paying off the IMF debt.
Stockbrokers and analysts said Tuesday that Kirchner's decision, criticized by the conservative opposition and some right-leaning economists, is more political than economic, and will not improve the country's risk rating. They also agreed foreign investors are now watching Argentina carefully, even more closely than the IMF has done since 1956, when it signed its first agreements with the nation's government.