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Bloomberg
Argentine Central Bank Sends $6.6 Billion in Funds to Treasury
March 01, 2010

By Eliana Raszewski

March 1 (Bloomberg) -- Argentina's central bank transferred $6.6 billion in reserves to accounts belonging to the Treasury that the government will use to make payments to multilateral lenders and bondholders, an official at the bank said.

The bank transferred $2.2 billion to pay debt owed to multilateral lenders and $4.4 billion to pay bondholders, according to the official, who can't be identified because of bank policies. The board of directors approved the transaction, following a decree ordering the transfer that President Cristina Fernandez de Kirchner announced today in a speech in Congress.

Fernandez scrapped a previous plan to use $6.6 billion in bank reserves for debt payments after the motion was blocked by a federal court and opposition leaders, who said congress would reject it after its summer recess.

Fernandez said her order today was signed using a 2006 law that allowed the country to draw on reserves to cancel $9.5 billion it owed to the International Monetary Fund.

"The government's decision will prove extremely controversial, further increasing tensions between the government, the opposition and the judiciary," Daniel Kerner, an analyst at the Eurasia Group in New York, wrote in an e-mail statement.

"The opposition will probably come to the conclusion that it can't let the government get away with this," Kerner wrote. "As a result, we expect political noise to rise further in coming months."

Senator Maria Eugenia Estenssoro from the opposition Civic Coalition said the lower house will discuss the new decree March 4.

"This was a trick -- the government just sought a way to earn some time and get the money transferred," Estenssoro said. "Congress will reject this decree as it was ready to reject the older one because all issues related to the country's debt should be voted on in Congress."

--Editors: Brendan Walsh, Joshua Goodman

To contact the reporter on this story: Eliana Raszewski in Buenos Aires at eraszewski@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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