Dubai, Sept 23: Delegates from the International Monetary Fund continued their meetings on Monday and discussed issues like Argentina's debt and a new economic plan for Iraq. Argentina drew the ire of private bondholders on Monday (September 22) by asking them to accept a stinging 75 percent cut in the face value of $94 billion in debt on which it defaulted nearly two years ago. It presented its case to the International Monetary Fund (IMF) which continued its meetings in Dubai on Monday. Striking a debt restructuring deal with its creditors is essential for Argentina, which is struggling to recover from an economic slump deeper than the 1930s U.S. Great Depression. But bondholders were scathing about the proposed terms, which were harsher than expected, even though Argentina framed them as a "point of departure" for negotiations.

A group of German investors said the offer was not realistic, while a representative of Italian bondholders rejected the proposal as "unreasonable and not an option".


"We are here today to try, and I want to be emphatic about this, in good faith and in a joint effort, to look for solutions. With this we're fulfilling the compromise we assumed at the start of the negotiations, in the sense that, as soon as we reached a long standing agreement with the international financial organisations, we would immediately proceed to a more substantial stage, a negotiation aimed to restructure the private debt," Argentina's finance minister Roberto Lavagna said.


Last week, a New York judge gave the Argentine government 45 days to get the restructuring under way before creditors can start laying their hands on assets. He said Argentina could not expect to be shielded indefinitely from litigation if it did not show concrete signs of progress on the restructuring.


Under the complex plan, Argentina will offer investors a menu of three different types of new bonds in exchange for 152 existing issues denominated in seven currencies.

In another part of the conference, the United States and Turkey on Monday finalised an $8.5 billion loan pact to bolster the Turkish economy and offset costs incurred during the U.S.-led war against Iraq.


U.S. Treasury Secretary John Snow, who negotiated with Turkish officials in the early hours of Monday morning to seal the deal, said the pact would not compel Turkey to send peacekeeping troops to Iraq.


"It's very much in the interest of the United States that Turkey maintained economic stability and continue its ambitious economic and political reform process. This U.S assistance aims to re-enforce, as in its purpose, re-enforcing, the Turkish Government's good-sound economic policies," Snow said.


The agreement does, however, require the country to cooperate with the United States in Iraq. The U.S. loan is to have a 10-year maturity and to be paid out in four equal disbursements over about 1-1/2 years.


Snow left no doubt he hoped the agreement would help mend ties between the two NATO allies frayed after Turkey refused in March to let U.S. forces invade neighbouring Iraq from its soil.


Turkey also has a $16-billion loan programme with the International Monetary Fund. The U.S. Treasury has previously said Turkey must stay on track with its IMF programme to get U.S. loans but the statement on Monday made no reference to the IMF.


The loan pact was a long time coming. President George W. Bush offered the money to Turkey in March despite its decision not to let U.S. troops use Turkish soil as a launch pad into Iraq, but talks bogged down for months.


Earlier during the IMF meeting, a group of seven finance chiefs on Saturday agreed to restructure Iraq's debt by the end of 2004 and Marek Belka, head of the U.S.-led body raising money for Iraq's rebuilding, said on Monday most of the country's debt would need to be forgiven.


Iraq owes some $130 billion to sovereign creditors and Russia is the largest with around $8 billion owed.


"In cooperation with the coalition provisional administration, we have taken steps to restore normal commercial and economic activities. Sanctions have been removed, imports and exports are now free, goods are now abundant in Iraqi markets and banks have started functioning again. As for October 15th we shall have a unified currency replacing the dual currency which we believe will contain speculations and control inflation," Adil Mahdi, chairman of the Iraqi governing council delegation said on Monday.


Bureau Report