Argentine provinces can issue debt - Congress

BUENOS AIRES, Oct 28 - Argentina's Congress passed on Wednesday a law allowing provinces to issue debt to ease tight financing, at a time when some provinces are having trouble meeting payroll and paying suppliers and have been putting pressure on the central budget.

The Senate passed the law, which already passed the lower house and which temporarily suspends rules blocking provinces from getting into debt.

After the country's deep recession in 2001-2002 some provinces issued quasi-currencies to pay workers.

Provincial deficits have deepened this year as tax revenue growth cools due to the global economic crisis, and government workers seek wage increases due to high inflation in Argentina.

Argentina's 24 provinces are expected to post a consolidated fiscal deficit of 9l8 billion pesos ($2.5 billion) this year, almost three times more than last year, according to a report by Economia y Regiones.

Some provinces have been cutting spending by delaying wages and paying suppliers with post-dated checks.

Buenos Aires Province, the most populous in the country, has already looked into issuing debt, but rates are high, up to 15 percent because Argentina's country risk rate is high.

The federal government has been blocked from issuing bonds on international markets for years because of lawsuits from investors who are still holding on to bonds defaulted on during the crisis.