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Argentina to scrap link with dollar


ARGENTINA expects to scrap its dual exchange system within five months, doing away with a fixed dollar rate of 1.4 pesos and leaving the currency to float on exchange markets, President Eduardo Duhalde said yesterday.

The move has been recommended by the International Monetary Fund.

The government last week scrapped the 11-year-old parity between the peso and the dollar and floated the national currency on the open market, while at the same time setting a fixed dollar rate of 1.4 for certain transactions.

However, the currency quickly fell and Argentinians buying dollars on the free market had to pay 1.7 pesos.

The president also confirmed that restrictions on bank withdrawals would be eased this week, although he did not specify how. The government has already made it clear that there is not enough money to lift the 1,500-peso cap on monthly withdrawals from current accounts.

Funds worth $65 billion before the government abandoned the peso-dollar parity have been frozen in Argentina's banking system since the restrictions were adopted on December 3 to avoid a a flight of capital.

The government claims it will shortly present a sustainable economic development plan and is confident it will be enough to persuade the IMF to offer fresh financial aid.

But Mr Duhalde stressed the programme would be based on the defence of Argentina's interests, particularly in trade and business.

He said: "We will go with our own development plan to defend the little we have left."

The IMF responded yesterday saying: "We are ready to help. The international community has every interest in seeing Argentina get out of this critical situation."

Adapted from The Telegraph: 16.1.2002



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