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Loser criticizes the use of reserves to pay debt
El Cronista
January 02, 2010

The economist, ex-director for the Western Hemisphere at the IMF, said that this recourse should be used "in case of a real crisis".

By Cronista.com

Economist Claudio Loser today criticized the payment of foreign debt with international reserves of the Central Bank because, he said, this recourse should only be used "in case of a real crisis" and predicted moderate growth for this year.

The ex-director of the Department for the Western Hemisphere of the International Monetary Fund (IMF) also recommended "reducing spending in the short term" to combat inflation in the country, a problem he considers "very serious", in statements to Radio 10.

The President in December created the so-called Bicentennial Fund for Dis-indebtedness and Stability, which seeks to use US$6.569 billion in reserves from the Central Bank to ensure debt payments in dollars in 2010.

The creation by Decree of Necessity and Urgency (DNU) 2010/2009 of the guarantee fund was rejected by the opposition and in various judicial filings, among them one from the province of San Luis before the Supreme Court of Justice, which will rule on the issue after the January judicial holiday.

"To pay debt with reserves when there are no other alternatives is fine, however (when it's not like that) it's spending money that one has saved for an emergency situation," the economist said.

The ex-IMF official from the 90s said that "it could be that in the very short term Argentina uses reserves to not ruin its external position, but for the long term it has to renegotiate its debt, it hast to continue getting loans from the Paris Club, et cetera."

Loser, who said that he would not have recommended the payment with resources from the Central Bank, urged the government to "maintain its reserve levels for a real crisis situation."

"In the history of Argentina we've had too many situations in which we've spent reserves and, in the end, when there is a problem we've had to enter one of those hated programs with the International Monetary Fund, because we were doing something like we are doing now," he argued.

The president of Banco Ciudad, Federico Sturzenegger, today also criticized the payment with reserves and said that the government is doing it, in reality, to increase spending.

"The government launched the measure (creation of the guarantee fund) to free up resources of the Treasury to raise current account spending," said Sturzenegger in an interview with the newspaper Cr tica de la Argentina.

In relation to the rise in prices, Loser pointed out that "Argentina was in recession in 2009, but inflation continued," and because of this problem "they should analyze it carefully" and "through very hard work."

The economist, who recalled that countries such as Chile, Mexico and Brazil have inflation less than 5% a year, said that to head off a rise in prices "it's very difficult to think in another other than short-term reductions in spending."

"The government is seeking excuses to say that inflation is not so big, but we have a serious problem in fiscal and monetary management," he said.

Loser predicted in 2010 "certainly would be better than 2009, but not like 2004, 2005 or 2007."

The economist expected "very modest growth" of the Argentine economy, around 1%, and said that "it is going to be a better year, but with the need for much prudence on the part of the government."

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