The head of Argentina's central bank is set to resign, dampening hopes of an early return to economic stability.

The Reuters news agency cited government sources as saying that Mario Blejer, who was appointed as central bank chief just one month ago, is expected to tender his resignation next week.

Mr Blejer is thought likely to leave his post by the end of the month.

The departure of Mr Blejer, a former International Monetary Fund official seen as a supporter of orthodox monetary policies, would further undermine investor confidence in the Argentine economy.

It could also make a resumption of sorely-needed IMF loans to the beleaguered country less likely.

Mr Blejer is reported to have threatened to resign earlier this month unless the country's national assembly gave him immunity from possible lawsuits stemming from his planned reform of the financial system.

He is also reported to have disagreed with the government over monetary policy.

Tensions mount

This would not be the first time that top-level resignations have cast doubt over attempts to steer Argentina's economy back on track.

The country went through five economy ministers between December last year and April 2002.

The resignations reflect tensions between the need to push through the austerity measures demanded by the IMF, and fear of provoking mass protests by increasingly desperate Argentines.

Several people died during a round of violent demonstrations in December.

Argentina's economy, gripped by recession for the last four years, fell into crisis late last year after the government missed repayments on part of its $140bn debt.

A run on bank deposits brought the banking system close to collapse earlier this year, forcing the government to impose highly unpopular restrictions on savings withdrawals.

A quarter of the country's workforce is unemployed, and about half of the population is living in poverty.

Argentina's economy shrank by 16% during the first three months of the year, figures out earlier this month showed.