Print

Mail

wiki links

Uruguay to receive financial assistance

People wait in line for food at a soup kitchen in Montevideo, Uruguay, yesterday. The Bush administration will provide an emergency US$1.5 billion loan to Uruguay to help the country deal with an economic crisis that forced its banks to close last week. PHOTO: AP

Top IMF, World Bank and Inter-American Development Bank officials issued a statement yesterday stating they will increase aid to Uruguay from the three institutions, taking their support from three to US$3.8 billion.

The joint statement from officials at the three institutions added that they would recommend accelerating disbursements to Uruguay in order to make some US$1.5 billion available next week, once authorized by their respective boards.

The US government has also agreed to provide up to US$1.5 billion in bridge financing to Uruguay's central bank until the international financial institution loans are disbursed, according to the statement.

"With the help of this new assistance, the central bank of Uruguay will fully back 100 percent of sight and savings deposits in domestic banks," the statement read, "enabling the Uruguayan people to access their deposits and the payment system to operate effectively."

This "concerted response" by the international financial institutions "should restore confidence of depositors in Uruguay's financial system, and help Uruguay address the intense external pressures it has faced in recent months," the statement concluded.

Pennies from heaven * The IMF, World Bank and Inter-American Development Bank will provide US$3.8 billion in additional support. * The US government will provide up to US$1.5 billion in bridge financing to Uruguay's central bank.

US Treasury Secretary Paul O'Neill, who began a tour of Brazil, Uruguay and Argentina in Brasilia today, said he expected the new funds to reduce the pressure on its crumbling economy.

"We are confident that this enhanced program will help Uruguay address the intense external pressures it has faced in recent months. This confidence stems from the extraordinary actions and commitments by the Uruguayan authorities to address these pressures," he said.

Uruguay is struggling with its fourth year of recession, further aggravated by the financial turmoil of neighboring Argentina, where half the country now lives in poverty and nearly one-quarter is unemployed. IMF Managing Director Horst Kohler said he will recommend an increase of about US$500 million in the IMF's existing Stand-By Credit arrangement with Uruguay as part his institution's part of the plan.
This story has been viewed 1861 times.