MercoPress. South Atlantic News Agency

Argentine central bank chiefs to go.

Argentina's centre-left government is to replace Alfonso Prat-Gay, central bank president, as part of a wide-ranging shake-up of the country's highest monetary authority.

The changes, which will affect more than half the number of top jobs at the bank, come at a crucial moment for Argentina. President Néstor Kirchner's leftwing administration is about to launch an offer to restructure more than $100bn (£55bn, ?82bn) in debt following the country's sovereign default in December 2001. It was still unclear on Friday what triggered Mr Prat-Gay's surprise departure. His term officially expires next Thursday but it had been assumed his mandate would be renewed automatically. But Mr Prat-Gay had been lobbying the government for months to allow him to pick at least one of the replacements for four bank directors whose mandates also end next week.

That bid failed this week when Mr Kirchner revealed a list full of his own supporters and those of Roberto Lavagna, the country's economy minister. Local media reports on Friday suggested Mr Prat-Gay's departure might also have stemmed from disagreements over the handling of the debt-restructuring process.

Leading bondholder groups have rejected the administration's offer, calculated to be worth just 25 cents on the dollar, as unacceptably low. Investors have criticised Mr Kirchner and his team for their refusal to hold formal negotiations.

This week, Mr Lavagna annoyed bondholders further by sending to Congress a draft of next year's budget that contemplates a primary fiscal surplus savings before interest payments equivalent to 3.2 per cent of gross domestic product. Bondholders and the International Monetary Fund consider that figure, defining the money earmarked to service debts, too low.

They point to Argentina's economic recovery since the turmoil of December 2001 and to the government's swollen coffers as evidence that the country can afford to improve its offer.

Gustavo Cañonero, chief economist for Latin America at Deutsche Bank in New York, said Mr Prat-Gay's departure was unlikely to change what until now has been a highly prudent monetary policy at the central bank.

Nor was it likely to alter Mr Prat-Gay's goal of introducing inflation-targeting as the basis of monetary policy, he said. Indeed, the currency and stock markets reacted calmly to the news.

Mr Prat-Gay became the central bank's fifth president in 20 months in December 2002. He will be replaced by Martin Redrado, chief trade negotiator at the foreign ministry, pending approval from the Senate.