FOR IMMEDIATE RELEASE
World Bank
1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234
BANK NEWS RELEASE 93/50 LAC                              Contact: Ciro Gamarra
(202)473-8721
WORLD BANK LENDS $400 MILLION TO ARGENTINA FOR FINANCIAL REFORM
WASHINGTON, D.C., February 16, 1993 -- The World Bank has approved a $400
million to Argentina to support reforms in the financial sector and to provide resources for
Argentina's debt and debt service reduction arrangements. The loan includes up to $200
million that may be set aside for the restructuring of the country's public external debt.
On January 5, 1993, the World Bank approved a loan of $450 million to support the
debt agreement with the commercial banks and authorized an amount of $100 million to be
set aside from a $300 million loan for public enterprise reform for the same purpose. With
these amounts set aside, the total participation of the World Bank in Argentina's debt
restructuring adds up to $750 million.
The $400 million loan will assist in reducing the role of the state in the financial
sector as well as strengthening the banking sector and its supervisory framework. The
financial sector reform will stimulate a more competitive private banking system which is
expected to improve resource mobilization and to increase the efficiency of resource
allocation. It will also generate fiscal and quasi-fiscal savings as a result of the reduced role
of public banks, including the Central Bank.
Indirectly, provincial banks will be encouraged to restructure, close or privatize, thus
generating provincial savings and lessening pressures for emergency financing by the Federal
Government and the Central Bank.
The loan will be disbursed in three tranches over a period of three years. The first
tranche, of $205 million, includes the $200 million set aside for debt restructuring. Funds not
needed for the amount set aside will be reallocated for the first tranche. The second tranche
is of $95 million and the third of $100 million.
The first tranche and any amounts set aside will be available upon effectiveness of the
loan. The second and third tranches will be conditioned on the Government maintaining a
satisfactory macroeconomic and financial sector performance and a series of actions to
improve bank supervision as well as downsize or sell state banks.
NOTE: Money figures are expressed in U. S. dollar equivalents.


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This operation builds on Central Bank reforms supported by a $325 million public
sector reform loan in July 1991 and the technical assistance for institutional support to the
Central Bank and Superintendency of Banks provided by a $23 million loan in June 1991.
Both these earlier operations are proceeding well.
Loan proceeds, other than those needed for amounts set aside, wil be used to finance
the foreign exchange cost of general imports (goods and relevant foreign services), excluding
goods financed by other multilateral or bilateral agencies, luxury goods, military equipment
and other goods specifically prohibited.
The Export-Import Bank of Japan is cofinancing this adjustment loan in an amount of
$200 million.
The $400 million World Bank loan was made to the Republic of Argentina for 15
years, including five years of grace, with a variable interest rate, currently 7.43 percent,
linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of
0.25 percent on the undisbursed balances.
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