Argentina has threatened to default on its debt when the government said it was "impossible" to pay bond service due on June 30.
Buenos Aires is locked in a 12-year legal fight with creditors who refused to participate in two restructurings that followed Argentina's 2002 default on $100 billion in bonds.
The long impasse in the US courts has kept the country from accessing international capital markets as its economy stagnates, inflation soars and central bank reserves fall.
Earlier this week, the US Supreme Court declined to hear an appeal by Argentina in its battle against the hedge funds which refused to take part in restructurings offered in 2005 and 2010.
This left intact a ruling by US Judge Thomas Griesa in New York ordering the country to pay the hedge fund "holdouts".
The US Circuit Court of Appeals yesterday lifted the stay it had placed on an injunction by Griesa barring payment to holders of restructured bonds via US banks unless the "holdouts" were paid $1.33 billion at the same time.
Talks are nevertheless expected between the two sides in New York next week.
The holdout creditors are led by NML Capital, a division of billionaire Paul Singer's Elliott Management Corp., and Aurelius Capital Management, chaired by Mark Brodsky, who warned that next week's negotiations could prove to be a "charade".
The holdouts, disparaged as "vultures" by the Argentine government for picking over the bones of the country's traumatic 2002 economic crisis, are suing for 100 cents on the dollar rather than swallow the steep discounts that were accepted by holders of bonds that were restructured.
In its statement the ministry "lamented" the lifting of the stay. It said it remained willing to pay holders of its revamped debt but for the fact that the holdouts would have to be paid at the same time, something Argentina says it cannot afford to do.
"Pari Passu (equal treatment) requirements impede Argentina from making the June 30 coupon payment to the holders of restructured bonds unless, at the same time, it pays all that is being demanded by the vulture funds, which could be up to $15 billion in total," the economy ministry said.
That would be more than half the reserves held by the central bank of Argentina, Latin America's third biggest economy and a major corn and soy exporter.
A technical default would not occur immediately on June 30 because the government has a grace period of 30 days before such a determination can be made.
