Argentine salaries paid in bonds

Buenos Aires province has run out of cash

More than 150,000 civil servants in Argentina have begun receiving part of their salaries in bonds after the local government ran out of cash.

The bonds, named after the 19th century Argentine currency, the patacon, were introduced in Buenos Aires province amid Argentina's worst recession for decades.

The patacones, which will be paid to state workers who earn more than $740 a month, can be used to buy food, settle bills and pay federal taxes.

We think this is going to work very well

Jorge Sarghini, Buenos Aires finance minister

The money saved on salaries will be used to pay back some of the interest on the province's estimated $25bn debt.

Correspondents say the measure is an indication of how close the national economy is to collapse.

The federal government has already agreed with the International Monetary Fund (IMF) a zero deficit policy, which means it can only spend what it brings in in tax.

It has also asked the IMF for an emergency aid package of up to $9bn in loans, in addition to $40bn in financial assistance pledged by the IMF last December.

Cash-strapped

Buenos Aires is the largest province in Argentina and, like other provinces, is in desperate need of cash.

Argentina has asked the IMF for billions of dollars in emergency aid

It has been hit by falling tax receipts, customers have been withdrawing their savings from the banks, and credit is drying up.

About $90m-worth of the pastel-coloured bonds have been printed so far and authorities say they had a successful introduction.

"We think this is going to work very well. Today the patacones began circulating and they are being accepted by businesses and other establishments," said Buenos Aires province's finance minister, Jorge Sarghini.

Patacombo deal

The BBC's Lourdes Heredia in Buenos Aires says the new currency has caused a lot of confusion.

In theory the bonds will pay 7% interest and be redeemable in a year, but many civil servants fear the patacones will be subject to rapid devaluation.

Despite doubts about the scheme, some shops and restaurants, desperate to keep their doors open after three years of recession, are planning to accept the bonds.

The American fast-food giant McDonalds marked the occasion by launching a special new Patacombo deal, comprising two cheeseburgers, fries and a soft drink for five patacones, the equivalent of $5.