President Javier Milei presented a bill in a national TV address Thursday night to reform the Central Bank so it is prohibited from financing government spending in the future.
Milei’s reform would also require two-thirds of lawmakers in both houses of Congress to vote in favour of removing a Central Bank governor in a push to strengthen its independence. The legislation stipulates the institution’s core mission is to preserve the peso’s value, unwinding a multi-pronged mandate set by his rivals in 2012.
“The Central Bank has been a tool that allowed the political establishment to steal,” Milei said from the presidential palace, flanked by his ministers and advisers. “The reform of the Central Bank’s charter seeks to put an end to the theft.”
Milei’s push to fortify the Central Bank contrasts with his campaign pledges in 2023 to dollarise the economy and definitively shutter the institution he described as “the worst garbage that exists on this Earth.” Even a year into his Presidency, he committed to closing the Central Bank within four years. On Thursday, however, Milei made no mention of eliminating it.
Congress received the bill early Friday, according to the lower house’s press office. Milei plans to send separate legislation aimed at cutting red tape in the local capital market to incentivise investment. He also wants to institute a US-style government shutdown in Argentina if the country runs a deficit over multiple months.
If Congress fails to fix the deficit, the entire presidential Cabinet and lawmakers wouldn’t receive salaries, Milei said in the address.
The Central Bank’s charter, which is its governing law, until 2012 stipulated that the bank’s purpose was to preserve the peso’s value, similar to most inflation-targeting central banks. Former president Cristina Fernández de Kirchner in that year broadened the mandate so that it also includes monetary and financial stability, employment and economic development with social equity. Those changes gave the bank greater flexibility to print money to finance government spending.
Milei’s reform seeks to end the Central Bank’s role as a lender to the government. For years, Argentina financed persistent fiscal deficits by printing pesos, a practice that fuelled recurring currency crises and ultimately pushed inflation into triple digits before Milei was elected.
Since Milei took office in December 2023, the administration has relied instead on deep spending cuts to eliminate the fiscal deficit while banning monetary financing through executive order. The proposed overhaul would enshrine those restrictions in law, making it harder for future governments to use the Central Bank to fund public spending.
by Manuela Tobias, Bloomberg
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