"We're not paying but the negotiations are continuing," the government source said.

The default -- Argentina's ninth overall -- was widely expected after the economic ministry announced on Thursday that it was postponing talks for a second time with international creditors on restructuring $66 billion of its debt, this time until June 2.

However, President Alberto Fernandez's government is expecting to come to an agreement before Argentina suffers the full effects of its default.

The crisis-wracked South American country, which has been in recession for two years, currently owes $324 billion, amounting to around 90 percent of its GDP.

It was already trying to renegotiate its crippling debt before its economy was hit -- like others all over the world -- by the coronavirus pandemic.

Although it is one of the world leaders in food exports, Argentina has already defaulted eight times in its history, the most recent being in 2001 when it owed $100 billion.

That triggered a painful social and economic crisis.

'Nothing of substance'

Argentina's main group of creditors is demanding "a direct and immediate discussion" on its restructure plans.

"The group is happy to see that Argentina has expressed its intention to work with the creditors, but actions speak louder than words," said the Ad Hoc group made up of investment funds including BlackRock and Fidelity.

"Over the last month, Argentina has communicated virtually nothing of substance to its creditors."

Economy Minister Martin Guzman has taken an aggressive stance on debt, in part driven by a need to free up resources to fight the novel coronavirus pandemic.

Argentina asked bondholders for a three-year grace period on debt repayment, a 62 percent reduction on interest amounting to $37.9 billion, and 5.4 percent on capital -- or $3.6 billion.

That was rejected with a counter offer that the government says it is studying.

"If the majority agrees to the exchange, the default will be very short. I don't think there will be a reduction in the letters of credit" that would impede essential imports, economist Marina Dal Poggetto from EcoGo told AFP.

"But if negotiations take a long time, we'll pay dearly."

The International Monetary Fund, which is supporting Argentina in its restructuring plan, says it has been encouraged by the "willingness of both sides to continue discussions to reach a deal," spokesman Gerry Rice said.

But analysts Capital Economics said "there is a growing risk that the restructuring talks drag on into next year."

'Waterfall of bad news'

Yet more bond interest payments are due at the end of June, which could be delayed by a month.

But if by then there is no restructure agreement, "bondholders will probably consider it more convenient to litigate given they think it unlikely that Argentina will be able to reach a short-term agreement," Ignacio Labaqui of Medley Global Advisors told AFP.

If bondholders take Argentina to court in the United States, it would be "a waterfall of bad news for the country," said Sebastian Maril, from the Fin.Guru consultancy.

Now that Argentina has defaulted, it also runs the risk of its debt being bought at a cut-price deal by speculative funds that could then choose to pursue much bigger rewards through litigation.

Such funds, known as "vultures" in Argentina, already did so successfully in the New York courts in 2014.

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