Argentina agrees deal to restructure crippling debt payments

ARGENTINA clinched a watershed debt rollover deal with the International Monetary Fund (IMF) on Thursday after a year of tortuous negotiations, gaining breathing space to find a way out of its worst ever financial crisis.

The IMF said its board would review the accord in the next few days.

The short-term deal involves a roll-over $6.6bn in debt which Argentina owes the fund .

The lender typically only takes agreements to a vote at its executive board when it expects them to be approved meaning it is seen as a done deal. But there will be no new cash.

With children emaciated from malnutrition in the north and half the population living in poverty, Argentina a model of market reforms in the 1990s is desperate for fresh funds.

Argentina had announced a default with the Inter-American Development Bank on Wednesday in a bid to force the IMF's hand. Argentina has already defaulted on a payment to the World Bank and $95bn in privately held debt.

Government officials said Argentina had also sealed a deal to refinance $4.4bn worth of debts due to the Inter-American Development Bank and the World Bank, but top level sources close to the talks said while such a deal was likely, they had jumped the gun.

The IMF deal ends more than a year of talks in which both sides failed to agree terms of a pact to help Argentina dig out of a grinding four-year recession, brought on by a catastrophic economic meltdown in 2001.

As a result of Thursday's deal, Argentina said it was making a $1bn debt payment to the IMF on Friday which, if missed, would have been another embarrassing default and would have cut off Argentina's last source of aid.

That $1bn will then return to Buenos Aires once the deal is approved by the IMF's board, which sources at the IMF said is expected by the end of next week.

In return for the deal, IMF sources said Argentina promised to keep tight budgetary control, agreeing to limit the money printing by the central bank

The deal comes after the Group of Seven industrialised nations the United States, Japan, Germany, Britain, France, Italy and Canada pressured the IMF in recent weeks to cobble together an interim deal.