By Adam Jourdan and Cassandra Garrison
BUENOS AIRES (Reuters) - Argentina, set to wrap up a $65 billion debt deal with creditors this week, has formally initiated talks to negotiate a new deal to replace its record standby agreement with the International Monetary Fund as it looks to escape from recession and default.
In a letter to IMF head Kristalina Georgieva on Wednesday, Argentina's Economy Minister Martin Guzman and central bank chief Miguel Angel Pesce requested formal talks that would lead to a new program to succeed the "canceled and derailed 2018 stand-by arrangement."
"The crisis that affects our country today was deepened by a quick agreement with the IMF in 2018, that was unsustainable, and carried out with its back to society," Guzman tweeted, adding it was vital to reschedule debt maturities with the fund.
The IMF agreed to float cash-strapped Argentina a $57 billion financing program two years ago, the biggest in the fund's history, under the previous administration of Mauricio Macri. Around $44 billion of that has already been lent.
Georgieva said in a statement that she had held a "very constructive and positive conversation" with Argentina's center-left Peronist President Alberto Fernandez and that the IMF was ready to "support Argentina in these challenging times."
Argentina's letter detailed the depth of its economic crisis and its efforts to prevent a further fall in output and employment, lower inflation and restore debt sustainability as it faces an estimated economic contraction of 12.5% this year.
"We are determined to restart the process of pursuing a consistent fiscal path once the effects of the pandemic disappear," it said.
Argentina's previous government faced a cash crunch two years ago after Macri's austerity drive, which included cuts to energy subsidies. Vendors raised consumer prices to help cover rising energy costs, fueling inflation.
Argentina earlier this month reached a preliminary agreement with creditors to restructure around $65 billion in foreign debt. Bondholders have until Aug. 28 to accept the offer, though all three major creditor groups have supported a deal.
In a separate statement, the government said Fernandez told Georgieva by phone that a new agreement should focus on economic recovery and solving pressing social problems.