Javier Milei Unveils Central Bank Reform Plan to Limit Its Powers

Argentine President Javier Milei is set to introduce a significant reform of the Central Bank's (BCRA) charter, a move his administration likens to closing the institution. This initiative marks a stark departure from Milei's past calls to abolish the bank, now aiming to curtail its functions to primarily preserving the currency's value and acting as a liquidity provider, with an explicit ban on financing the state.

The proposed legislation, which Milei will submit to Congress, centers on four key pillars. Firstly, it mandates that the monetary authority's sole objective is to preserve the currency's value. Secondly, it strictly prohibits direct and indirect financing of the National Treasury. Thirdly, it seeks to eliminate non-transferable Treasury bills held by the Central Bank. Finally, the reform aims to bolster the bank's governance by enhancing the stability of its leadership and raising the requirements for removing the president and board members.

During a visit to Peru, where he received an honorary doctorate, Milei previewed aspects of the reform. He stated that the BCRA's fundamental mission would be to preserve the currency's value, and financing the treasury would be prohibited. He further proposed criminal consequences, including imprisonment, for those who violate this principle, labeling such actions as fraud and illicit association.

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The BCRA will return to having as its fundamental mission to preserve the value of the currency. It will be prohibited to finance the treasury directly or indirectly.

The reform carries substantial symbolic weight. The government intends to replace the current inscription at the Central Bank headquarters, established in 2012, which lists the bank's objectives as promoting monetary and financial stability, employment, and equitable social development. The new inscription would revert to a phrase similar to that used until 2012: "The primary and fundamental mission of the Central Bank of the Argentine Republic is to preserve the value of the currency."

This initiative directly challenges the reforms implemented during Cristina Kirchner's second term when Mercedes Marcó del Pont led the monetary authority. The government views this as a necessary step to reverse policies it deems detrimental to the economy.

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It will be considered fraud and illicit association. The president of the BCRA, the board, the Executive, and deputies and senators who approve budgets with fiscal deficits will go to jail.