President Mauricio Macri. Picture: REUTERS/AGUSTIN MARCARIAN
President Mauricio Macri. Picture: REUTERS/AGUSTIN MARCARIAN

Buenos Aires —  The Argentine government authorised the central bank on Sunday to restrict purchases of dollars as it burns through its reserves in an effort to prop up the peso currency.

The measure, which is scheduled to be in place through the end of the year, means major exporters, which will need permission from the central bank to access the foreign exchange market to purchase foreign currency and make transfers abroad.

"Given various factors that impacted the evolution of the Argentine economy and the uncertainty in the financial markets, the executive branch needed to adopt a series of extraordinary measures aimed at ensuring the normal functioning of the economy, sustaining the level of activity and employment and protecting consumers," said the decree published in an official bulletin on Sunday.

The central bank said in a statement the measure does not limit anyone from withdrawing dollars from their accounts. It does, however, restrict people from buying more than $10,000 per month, or making transfers exceeding that amount per month.

It also requires companies to sell their dollars from exports in the local market. They will not be permitted to stockpile dollars, the bank said.

The measure is a step further by the central bank after it announced on Friday that banks would need to seek prior authorisation before distributing their earnings, in order to "avoid any lack of money" and safeguard the liquidity of the country's financial system.

Some private economists said the policy announced on Friday, which could limit the availability of hard peso currency to financial institutions, looked like a return to capital controls in Latin America's third-largest economy.

Argentina's government and central bank is desperately trying to stabilise the economy after the results of the August 11 primary election sent bonds, stocks and the peso currency into a tailspin. Last week, risk spreads blew out to levels not seen since 2005 while the local peso currency extended its year-to-date swoon to 36%.

Centre-left Peronist challenger Alberto Fernandez garnered a wider-than-expected lead over business-friendly President Mauricio Macri, causing market fears over a potential return to the interventionist policies of former President Cristina Fernandez, Fernandez's vice-presidential candidate.

Fernandez is now the front-runner for Argentina's presidential election in October.

The central bank has burned through nearly $1bn in reserves since Wednesday in an effort to prop up the peso.