WASHINGTON, Jan 10: The International Monetary Fund (IMF) has urged crisis-stricken Argentina to take tough economic action and ensure a free-floating peso in order to qualify for aid, a newspaper reported on Thursday.

IMF Deputy Managing Director Anne Krueger sent a confidential letter to Economy Minister Jorge Remes Lenicov, advising the new government on the fiscal and monetary measures it needs to make, according to the Washington Post article.

The letter puts forward conditions for a new loan to Argentina, including a solution for enormous costs from its provinces, accustomed to passing the bill to the central government, the Post said.

The IMF recommends Argentina not to set up a variety of currency systems, but to allow the peso — previously pegged with the dollar but now devalued — to float freely, according to the article.

The Argentine government is currently in the process of establishing details of convertibility of the peso, devalued at around 30 per cent on January 6. Currency operations have been suspended since December 31.

Krueger in the letter strongly urges Argentina to restructure its tax system to remedy the chronic problem of tax evasion by both companies and individuals, and to come up with an anti-inflationary monetary policy, the Post wrote.

She also calls for restrictions on cash withdrawals to be lifted.

On Wednesday, US Treasury Secretary Paul O’Neill pressed Argentina to act quickly to stabilize its economy with a sustainable plan, suggesting that measures so far taken were insufficient to ensure an IMF loan.

Free market: The Argentine government on Thursday stressed its commitment to a free market and insisted its anti-crisis plan was aimed in that direction.

“We are more in favour of a free economy than those who favour a dollarization,” said Jorge Todesca, the number two in the economy ministry.

He made the remarks in response to claims the government of President Eduardo Duhalde was heading toward protectionism.

He stressed there would be no new tariff barriers or price controls under the anti-crisis package adopted by Congress on Sunday.

“If there is a programme that moves toward the free economy, it is this one,” he told journalists.

The new law is based on the elimination of the peso’s parity with the dollar.

Todesca also said the government would present to Congress a “credible and balanced budget and a consistent monetary plan.”—AFP