Argentina Declared Default to the World Bank Loan

The Argentine Government announced on the 14th that it could not pay back the principal of the debt they borrowed from the World Bank. It paid only the interest of 7,920,000 dollars without the principal out of 805,000,000 dollars of the World Bank loan, which was due that day.

The foreign media including the Economist interpreted this Default (not fulfilling the obligation) declaration, “It is a bald strategy to get financial support by concluding the slow negotiation with the IMF.”

This Default declaration was made while Argentina dispatched the Minister of Economy Roberto Rabana to Washington and was doing a ‘Cliff-Hanging’ negotiation with the IMF for financial support and resetting the financial obligation. The Argentine Minister of Interior Alfredo Atanasop laid the fault at the IMF`s door by saying, “If we pay back the principal, we cannot secure 90 billion dollars, which is the foreign currency holdings suggested by the IMF.” The Argentine President Eduardo Dualde also said, “It is dangerous to pay back the World Bank loan without concluding the negotiation with the IMF.”

However, the Economist pointed out, “It is questionable whether their bald strategy gets by or not because its confidence in the international financial society has gone down due to the Default.” The concerned party of the Default the World Bank immediately announced, “We will stop considering the new financial support to Argentina.”

The IMF announced on the 14th, “There is a new loan negotiation going on with Argentina,” but there is a strong criticism that the 80 billion dollar financial support to Argentina on last August was ‘an effort without result,’ so it is difficult to decide to provide any loan. Argentina declared the first Default last December that she could not pay back the loan from the foreign civilian financial instructions, and was getting loans only from the international organizations. If she cannot pay back this World Bank loan within 6 months, she will be classified as a ＇bad credit country＇ along with Zimbabwe and Iraq.

Seung-Jin Kim sarafina@donga.com