$1.25-Billion Rescue Package : World Bank OKs New Loans for Argentina

WEST BERLIN — The World Bank announced Sunday that it has approved $1.25 billion worth of new loans to Argentina, the first stage of a multibillion-dollar financial rescue package now being assembled to help that country avert default.

The loans, which will be disbursed over the next several months, will pave the way for approval of a temporary bridge loan from the United States and other major industrial nations, possibly in late October. The bridge loan, expected to amount to about $500 million, would be designed to tide Buenos Aires over until the World Bank money is paid out.

Protest March

Approval of the World Bank loans, worked out at the annual meeting of the 151-country organization here, is intended to provide new momentum for parallel negotiations between Argentina and the International Monetary Fund, which have been snagged over Buenos Aires’ refusal to meet IMF demands for economic reforms.

Meanwhile, more than 20,000 people--some clad in black masks and others waving banners --marched through West Berlin on Sunday in a vocal but peaceful protest against the IMF and World Bank. Drums rolled and whistles sounded as left-wing activists, ecologists and others from more than 100 groups voiced their disapproval of IMF and World Bank policies, which they say are perpetuating Third World poverty and wrecking the environment.

Dozens of police in green riot gear accompanied the march as it wound its way from the city center to a rally on the avenue about 100 yards from the futuristic International Congress Centre where the IMF and World Bank are meeting amid unprecedented security.

Argentine Economy Minister Juan Vital Sourrouille, who is attending the World Bank meeting, said the World Bank loans were announced first “simply because we have finished our debate with the World Bank first.”

He estimated that negotiations with the IMF would continue for another 10 to 15 days. Once agreement is reached with the IMF, Sourrouille told reporters, Argentina will resume negotiations with commercial banks on the possibility of stretching out payments on outstanding loans.

In an unusual twist, the agreement on the World Bank loans was accompanied by a “letter of development policy” from the Argentine government detailing a spate of economic reforms it plans to impose, ranging from share cuts in public spending to deregulation of some key industries and new steps to broaden the current tax base. Such agreements traditionally are required only for loans from the IMF.

However, Sourrouille conceded Sunday that Argentina still has a long way to go in meeting IMF requirements for a loan from that organization, which is pressing for far more substantial budget cuts than Argentine President Raul Alfonsin has been willing to go along with. For the commercial banks, agreement on an IMF loan is far more important than Sunday’s World Bank accord.

Completion of the overall rescue package would be an important step, both for Argentina and the continuing global debt problem. Partly because of the failure of previous economic reform programs, the country is having difficulty paying its $56 billion foreign debt, about $34.2 billion of which is owed to commercial banks.