Analysts has warned, however, that difficulties will arise at mid-year, when Argentina works on next year's budget and negotiates terms with the IMF for its 2005 programme.

"Argentina will send the funds on Tuesday," a source in the presidential palace said, following a 20-minute telephone conversation between President Nestor Kirchner and interim International Monetary Fund director Anne Krueger.

After the announcement, Buenos Aire's leading MerVal index rose 5.8% to 1,216.90 points.

Kirchner's commitment

Kirchner had said payment would be made as long as it was not at the expense of social programmes. More than half of Argentina's 36 million residents live in poverty.

Kirchner's 11th-hour move came as the clock ticked down on a default on $30 billion in debt to multinational lending institutions.

Argentina had threatened to withhold payments if IMF officials did not give a clear indication they would soon approve the second review of a stand-by credit package established in September.

Argentina's total foreign debt, mostly to private lenders, tops a hefty $166 billion. It is calling for its debt to be slashed by 75%.

The Argentine government defaulted on its public debt in January 2002 amid violent street riots and an economic meltdown.