The International Monetary Fund's executive board yesterday approved Argentina's economic austerity plan, opening the door for that country to obtain $1.2 billion in IMF funding and $4.2 billion from commercial banks.

Argentina had been unable to obtain funding from commercial banks and the IMF since last February after the country failed to comply with the international funding agency's economic targets. In February, Argentina was scheduled to receive $243 million from the fund but did not because it was out of compliance with IMF targets last December.

The IMF approval yesterday will allow the debt-strapped country to obtain $243 million in funding installements this month, in September, November, February and May, pending approval of interim economic targets.

The agreement with the IMF comes at a time when some other Latin American countries have been flirting with the idea of setting their own terms for repaying foreign debt or outright refusing to repay the debt.

Alan Garcia, the new president of Peru, recently said that he will limit his country's debt repayments to 10 percent of his country's export earnings. Cuban President Fidel Castro has so far unsuccessfully tried to get other Latin debtors to repudiate their debt.

Some Latin American observers said that a consensus is forming in the region that the stringent measures adopted since the debt issue became a major problem in 1982 have not been completely successful. Some debtor countries, such as Peru, are considering ways to get around having to comply with IMF requirements before being able to borrow from commercial banks. Many bankers will not lend to countries without the IMF's stamp of approval.

However, observers yesterday said that many countries burdened with debt may follow the lead of Argentina, which attempted to skirt its financial obligations during most of 1984 and ended up returning to the IMF. The agreement yesterday, observers said, would tend to dismiss threats of any mass repudiation of debt by the Latin debtors.

Argentine President Raul Alfonsin took over that country late in 1983 as Argentina's first democratically elected president in eight years. But he received political pressure against the financial belt-tightening that the IMF requires before approving new funding.

By last fall, inflation had spiraled out of control and Argentina finally signed an accord with the IMF that the agency approved in late December.

However, the IMF, sensing that Argentina was not taking strong enough medicine, in February cut that country off until a new program was developed.

Many Latin American countries resent having to use a large part of their export earnings to pay interest on debt to western banks while they are required by the IMF to contract government spending and pursue such politically unpopular policies as reducing food and gasoline subsidies.

To return to the good graces of the IMF, the Argentine government recently implemented strict wage and price controls and developed a new currency called the austral and got rid of the peso. The government also said it would not print any new money to keep inflation under control.

Additionally, Argentina recently paid banks $570 million in overdue interest on its debt to bring its payments current to the end of February.