Argentina's Massa Orders Immediate Spending Limits In First Step

Argentina's new economy chief took a first step toward imposing new restraints on government expenditures, spending that has fueled one of Latin America's highest inflation rates in a country long plagued by financial turmoil.

Economy Minister Sergio Massa instructed finance officials in a memo to halt all temporary transfers, also known as direct loans, from the treasury to pay for government spending effective Thursday, according to that official document seen by Reuters.

The instructions in the memo dated Thursday confirm the austerity measure outlined by Massa in a speech he gave on Wednesday, his first day as minister, in which he sought to reassert the government's determination to tackle overspending.

"Beginning immediately and until new instructions are provided, we are instructing that (finance officials) should abstain from asking for temporary transfers from the national treasury for financing," according to the memo signed by Massa.

Annualized inflation in Argentina currently tops 60%, according to government data, and some analysts have projected it to exceed 70% by the end of the year.

The new economy minister pledged on Wednesday to prioritize cost-cutting measures in a push to narrow a widening budget deficit, as the country faces an economic crisis that President Alberto Fernandez has so far struggled to tame.

Some local markets nonetheless appeared encouraged by the latest developments.

Argentine stocks and bonds, as well as the peso currency, edged higher on Thursday, led by the Merval stock index, which rose by as much as 1.1% in the session before closing essentially flat.

Meanwhile, the parallel black market peso gained 1.7% to trade at 293 per U.S. dollar, while over-the-counter sovereign bonds rose 0.8%.