Argentina taps $6.5 billion in reserves to pay debt

BUENOS AIRES: Argentina withdrew 6.5 billion dollars from its central bank reserves Monday to pay some of its foreign debt, as President Cristina Kirchner circumvented court orders and defied fierce opposition from some lawmakers.

A central bank spokesman told AFP that the funds had been transferred to two accounts of the government treasury "following the decrees of the president."

Kirchner had signed two new decrees to draw from the reserves, getting around a court order earlier this year blocking the effort.

Kirchner is tapping in to foreign currency reserves to pay off a hefty chunk of the debt due this year to Argentina's international lenders and holders of bonds on which the country defaulted in 2001.

An earlier proposal faced opposition from then-central bank chief Martin Redrado, who was subsequently sacked by the president, sparking a major political and court row. An appeals court last Wednesday upheld the decision blocking the use of the funds.

Kirchner, who is trying to restore Argentina's standing in international credit markets and with multilateral lenders to avoid punitive interest rates, defended the strategy even though she had to back down from her earlier plan.

"The default is still one of the main problems facing Argentina in terms of funding," the president said in a speech earlier in the day, arguing that Buenos Aires must pay rates in the capital markets of 14 to 15 percent.