Protests spilt over into violence in Buenos Aires this week
A default on Argentina's $132bn debt would trigger the suspension of all further financial support from the International Monetary Fund, plunging the country deeper into chaos.
It would also shake international lenders' confidence in emerging market debt, making it far harder for developing countries worldwide to borrow money.
But analysts still doubt whether Argentina, which must pay back a total of $931m this month alone, will be able to meet its future repayment deadlines.
There is uncertainty also over whether Argentina will be able to complete a delicate debt swap deal under which bondholders would be offered longer-term securities carrying lower interest rates.
Crisis management
In order to meet its payments, Argentina's economy minister Domingo Cavallo has slashed public spending and pressured Argentine pension funds into buying new government bonds.
It has also imposed limits on cash withdrawals from banks, denting public confidence in the financial system.
The debt crisis has exacerbated a four-year recession during which unemployment has soared, sharply reducing standards of living for ordinary Argentines
There were mass protests spilling over at times into looting and violence throughout Argentina on Friday.
Confidence in the Argentine government's ability to manage the crisis received a fresh blow earlier on Friday when Mr Cavallo's highly respected deputy Daniel Marx announced that he is to step down.
However, Mr Marx, who has represented Argentina in talks with creditors for three years, said he would stay on until negotiations over the country's debt restructuring are complete.