(Bloomberg) -- Argentina’s La Rioja province has hired advisers to negotiate with bondholders as it’s facing “unprecedented economic challenges” to make principal and coupon payments on notes maturing in 2028. 

The province in northern Argentina hasn’t received its co-participation funds from the federal government, making its revenue insufficient to cover expenditures related to essential services and programs, officials said in a statement Monday. “These factors have significantly limited the province’s ability to honor its financial commitments, including the bonds,” they said in the document. 

La Rioja officials said they’ve engaged financial and legal advisers and want to kick start consultations with bondholders for an “amicable and consensual agreement in the shortest possible time frame.” Its 2028 bond traded near 56 cents on the dollar Monday, though it was above 58 cents earlier in February.

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The move reflects growing investor concern surrounding a multibillion-dollar pile of provincial debt after Argentine President Javier Milei announced plans to cut funding for the provinces. The governor of La Rioja, who recently approved the creation of a new currency, has blamed Milei’s austerity plan for forcing his government to freeze public workers’ salaries. 

Provincial bonds will be under additional pressure this year on the back of Milei’s cuts in discretionary transfers, according to Federico Cuba, senior economist in BancTrust. “If the spat with governors continue, this will become more complicated.”

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