The IMF suspended negotiations with Argentina last August

The scheme, which will leave bondholders with only some 25-50% of their initial investment, will now get under way in mid-January.

"We will just continue waiting," said Thomas Dawson, IMF spokesman.

The cash-strapped country has to repay the IMF $1.2bn during the first quarter of next year.

Argentina's financial crisis of 2001-02 culminated in debt default and the end of the fixed currency policy which had pegged the peso against the dollar for a decade.

On again, off again

Solving the debt problem is a tricky issue for President Kirchner

Although the economy is now growing again, the debt problem remains and solving it is a contentious issue for President Nestor Kirchner.

The debt exchange was supposed to launch last month, but international creditors did not give their full approval.