Argentina to pay $6.7-billion default debt to the Paris Club

President Cristina Fernandez of Argentina announced at a news conference that her country will pay its entire $6.7 billion debt to the Paris Club of lending nations in a bid to shore up fading investor confidence and to alleviate companies access to international financing as growth slows in South America's second-biggest economy.

President Cristina Fernandez said the government will use central bank reserves to pay the Paris Club $6.7 billion in debt which was in default since the 2001-2002 economic crises. Argentina's central bank has about $47 billion in foreign currency reserves.

She also said ''the payment confirms one more time Argentina's willingness to meet its international obligations''.

Fernandez said the debt repayment to the Paris Club is a part of a series of measures for the local industry, whose access to international credit had been limited by the unsettled Paris Club debt since 87 per cent of the debt owed to the Paris Club of creditor nations is held by Japan, Germany, the Netherlands, Italy, Spain and the United States.

The move also came after analysts opined that despite Argentina's strong macroeconomic records, was likely to head for another crash similar to the one in 2001 where they had to resort to loans from International Monetary Fund.

Argentina had defaulted on about $95 billion in bonds in the 2001 economic crisis, the largest default in history.

Fernandez's husband and predecessor Nestor Kirchner restructured most of that debt in 2005 and repaid in one go the $9.5 billion loan from the International Monetary Fund in 2006 using central bank reserves. He had said at that time the repayment of debt to the IMF would let the country reclaim its economic sovereignty.

After paying off the $9.5 billion to the IMF in 2006, Argentina showed no signs of repaying the Paris Club despite the fact that the default was blocking nearly $8 billion in foreign investment to the country.

The Paris Club had been asking Argentina to submit to International Monetary Fund surveillance, saying that it was a pre condition for any debt renegotiation.

Argentina had made up its mind that it was not going to allow international scrutiny of its economic management by an institution the government blames for mismanaging the country's economy which had led to Argentina's meltdown and has refused to submit itself to the annual economic reviews conducted by the IMF since 2006.

Kirchner had said there was "no way in hell" Argentina would subject itself to the IMF's conditioned loans again, and Fernandez upheld his hard-line stance.

Paying off the debt to the Paris Club may smooth access to international investment credits for companies in Argentina as according to the United Nations, of the $105.9 billion in foreign direct investment in Latin America and the Caribbean, Brazil got 33 per cent, Mexico 22 per cent, Chile 14 per cent and Argentina received just 5.4 per cent last year.