ARGENTINA’s central bank chief refused to resign after President Christina Kirchner demanded on Wednesday that he step down, in a growing row over payments of debt.

Martin Redrado had declined to hand over US$ 6.5 billion of Argentina’s foreign currency reserves to pay off national debt, after the president ordered him to do so three weeks ago.

The standoff could lead to a political crisis, since Redrado can only be fired by a decision from Argentina’s lawmakers.

Kirchner announced the call for Redrado’s resignation on her official website early Wednesday.

“They have asked him to step down. He responded that he will not quit,” a central bank official said, adding that the government would have to apply the “appropriate mechanism” to remove Redrado.

According to the bank’s charter, the government would have to turn to Congress to decide to remove a sitting central bank president.

However, Kirchner’s control over Congress has weakened since mid-term elections last year.

Kirchner in December signed a presidential decree ordering the transfer of US$6.5 billion from central bank reserves to a new fund, known as the Bicentennial Fund, to guarantee debt payments in 2010 and free up cash for other spending.

Redrado had sought to investigate all the possible legal consequences of such a decision, which was opposed by opposition lawmakers and which the Supreme Court sought to clarify.

Kirchner said in December that she wanted to guarantee the debt payment in an effort to help Argentina end its isolation from global credit markets.

International investors remain skittish after the South American nation’s massive 2001 sovereign debt default.

The prospective payment aimed to “lower as much as possible the future potential indebtedness of our country”, Kirchner said.

Redrado took control of the central bank in 2004 under the government of Nestor Kirchner, the husband of the current president, and his mandate is due to expire in September this year.

The government has offered his post to Mario Blejer, who led the central bank under the government of Eduardo Duhalde, in 2001-3, during the worst economic crisis for decades.

Argentina faces maturing debt repayments totalling US$13 billion in 2010.

The central bank reserves contain more than US$48 billion.

Argentina fulfilled its repayments of US$20 billion in 2009, but the rate of growth in government income has slowed down due to the global economic crisis.

“The whole episode is symptomatic of wider problems in the economy — notably the collapse in revenues that has resulted from a deep recession and the drop in commodity prices since mid-2008,” Neil Shearing, Senior Emerging markets economist for Capital Economics Ltd in London, told AFP.

“A period of impasse now looms and markets have sold off accordingly — the peso is down 0.2 per cent against the dollar, equities are down by 1.5 per cent,” Shearing added.