Argentina has reached an agreement with the International Monetary Fund (IMF) to revamp some $40 billion in debt, President Alberto Fernandez announced on Friday.

The deal marks a major breakthrough in tense and winding talks to restructure huge loans the South American country cannot repay.

Argentina has been locked in arduous negotiation for over a year with the IMF over a new program to revamp debt outstanding from a failed $57 billion loan deal from 2018, the Fund’s largest ever, during the government of conservative Mauricio Macri in the midst of a currency crisis. It faces a $700 million payment due Friday.

Argentina had spent three years trying to renegotiate repayment terms with the IMF and considered a deal vital to stabilizing an economy whose lengthy crisis has been exacerbated by the pandemic.

"With this agreement, we can order the present and build a future," Fernandez said in an address to the nation from the presidential residence in Buenos Aires, adding the agreement would not limit the country’s economic plans or spending.

"We had an unpayable debt, which left us without a present and a future. Now we have a reasonable agreement that will allow us to grow and meet our obligations through our growth."

"This understanding plans to sustain the economic recovery that has already begun."

Fernandez said the deal crucially would not force the government to reduce public spending and would allow it to increase investment in public works.

Under the new deal, Argentina has committed to progressively reducing its fiscal deficit from 3% in 2021 to just 0.9% in 2024, Economy Minister Martin Guzman said.

The gradual reduction – to 2.5% in 2022 and 1.9% in 2023 – would "not prevent the recovery" of the economy, said Guzman.

It would also allow for public spending to evolve "without an adjustment."

The South American country was due this year to pay back $19 billion of its $44-billion debt to the IMF.

Recent uncertainty over a deal has hammered Argentina's sovereign bonds, while anti-IMF rhetoric has risen in the grain-producing country, with some protesters on Thursday calling for the government to suspend repayments.

The two sides had been at loggerheads over how quickly Argentina should reduce its fiscal deficit, with the country arguing it needed to be able to maintain spending to preserve a fragile economic growth recovery.

The country experienced three years of recession until registering a 10% increase in GDP in 2021, although the economy had shrunk by as much the previous year as it suffered the worst effects of the pandemic.