The International Monetary Fund (IMF) has agreed to re-schedule debt owed by Argentina, after a year of talks.

The deal amounts to a $6.78bn loan package, which should give Argentina some breathing space to sort out its ailing economy.

The past uncertainty connected with Argentina is over Francis Mer French Economy Minister

Under the deal, the Fund has approved a short-term credit line of almost $3bn to repay debts to multilateral organisations that could not be postponed.

The IMF has also extended a deadline until 31 August for repayment of a further $3.8bn in debt to the Fund itself.

Argentine President Eduardo Duhalde described the agreement as a landmark in Argentina's efforts to rehabilitate its economy.

"This is good news. This is a success," President Duhalde said from the World Economic Forum in Davos, Switzerland.

"Argentina has to reintegrate itself into the international community," he added.

The deal had been expected after IMF managing director Horst Koehler said last week that he would recommend approval of stop-gap financing for Argentina.

'Very happy'

Approval of the deal was first made public at the World Economic Forum.

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"I am happy to tell you that the deal has been done," French Economy Minister Francis Mer told BBC News Online and other reporters in Davos.

"The past uncertainty connected with Argentina is over. I am sure that with the full commitment of both parties they should be in a position to restore the confidence [lost] in foreign investment."

During a year of complex and often frustrating negotiations between the IMF and Argentina, it looked at times as if relations would break down.

"In my view, [the IMF] have not helped us amid the worst moment in our history and they have been hostile toward us," President Duhalde said in a recent interview.

IMF officials were also greeted with angry protests on the streets of Buenos Aires, as Argentines blamed foreign interference for some of their woes.

President Duhalde also said on Friday at the World Economic Forum that Argentina would be meeting for further discussions with the World Bank next week.

Indebted

A more comprehensive debt deal is expected to be negotiated after the country's general elections in April.

President Duhalde has expressed frustration with the IMF

The deal should provide Argentina with some relief until the new government is elected.

Argentina is experiencing its worst economic crisis in decades and is in default on loans with most major international donors.

Earlier this month Argentina defaulted on a $681m debt payment to the Inter-American Development Bank.