Argentina was on the brink of a new debt default with the IMF today as last-ditch talks went to the wire, but analysts expected the standoff to be resolved soon and any default to be short-lived.
Argentina has until 10 p.m. Irish time to pay $3.1 billion or be in default with the International Monetary Fund for the second time in six months, a move that would halt further loans and isolate Latin America's third largest economy from world markets.
Cabinet chief Alberto Fernandez said the government had blocked the bank account that would normally be used to pay the fund, but said that didn't rule out payment if a deal was reached and the two sides were "still negotiating".
Argentina, which is recovering from a sovereign default in early 2002, is refusing to dip into around $15 billion in international reserves to make the payment due today.
It says the Fund must first promise it will pass a second review of a three-year loan accord, which would release $3.1 billion to Argentina, effectively reimbursing Argentina for its payment due today to the fund.
The IMF, unhappy with progress in Argentina's negotiations with creditors holding $88 billion in defaulted bonds, wants Buenos Aires to follow specific measures to keep a $13.3 billion loan pact on track.
Sources close to the talks say the sides are deadlocked over a decree the Fund wants to ensure banks handling the debt restructuring cannot resign or be replaced, and over IMF demands that Argentina raise the bar on how many creditors must accept its debt offer for it to be deemed a success.