BUENOS AIRES — The government will begin monthly payments of $40 million to creditor banks that have lent the country 1,000 times that sum, the president of Citibank in Argentina said Friday.
Two-thirds of Argentina's foreign debt of $60 billion plus $6.5 billion in overdue interest is owed to commercial banks. The largest creditors include Manufacturers Hanover, Chase Manhattan and Citibank.
"Sometime before the end of the day it (payment) will take place," Citibank's local president, Ricardo Handley, told the independent Radio Mitre.
The announcement coincided with the arrival Friday of Michel Camdessus, director-general of the International Monetary Fund.
The last payment was made in May. That $40 million was the first interest payment in two years.
The government of President Carlos Menem wants to negotiate a debt reduction, lower interest rates and new funds with its creditors. Central Bank President Javier Gonzalez Fraga plans to fly to New York in late July to resume talks on those issues.
A steering committee representing private banks has insisted that significant payments be made on overdue interest before debt reduction or fresh loans will be considered.
A director of another U.S. bank, who spoke on condition of anonymity, said the banks want payments of $100 million a month. He added that the banks believed that Argentina is capable of such payments.
Central Bank director Roque Fernandez said Thursday that foreign reserves, which were little more than $100 million when Menem was inaugurated in July, 1989, now top $2.1 billion.
The government on Friday reported that the cost of living rose by 13.9% in June and a total of 716% for the first six months of this year.
The monthly rate was a disappointment to the government, which had hoped to hold the cost of living increase to a single digit for the first time since November.
The government has committed itself with the IMF to reduce monthly inflation to 2% by December.
Argentina has suffered triple-digit annual inflation in 15 of the past 16 years. Last year, inflation soared to 4,924%.
Also Friday, Argentina and Brazil pledged to remove all barriers to bilateral trade by Dec. 31, 1994.