Tom Gibb BBC South America correspondent

Mr Koehler is more upbeat about Argentina than for a long time

This would replace a short-term programme which runs out in August.

IMF Managing Director Horst Koehler made the announcement in the Argentine capital, Buenos Aires, at the end of a two-day visit to the country.

Mr Koehler said he was surprised by the level of recovery he had seen in Argentina.

New vision

Eighteen months ago, the country defaulted on more than half its debt after being cut off from IMF support.

The IMF managing director said he believed the new Argentine president, Nestor Kirchner, had a vision for the future which would lead to rigorous growth and social cohesion.

He said the IMF was looking at a 3-year debt relief programme rather than another short-term package.

During that time, he said the IMF and the government had agreed on the need for deeper structural reforms.

These will have to be negotiated but he suggested they should include restructuring relations between different levels of government as well as creating a better legal framework to attract foreign investment.

Over the last few years disagreements between different levels of government in Argentina over spending targets have repeatedly undermined recovery plans.

The upbeat note from both the IMF and the government is bound to now raise expectations that a deal is in the pipeline, something that would give Nestor Kirchner a crucial lift in the first months of his presidency.