President Javier Milei announced on Thursday the specifics of his strategy to reform the Charter of the Argentine Central Bank, a fundamental element of his economic agenda for the upcoming months. He made the announcement on national television, a platform previously utilised for economic declarations, including the presentation of the 2026 budget proposal. In his address, Milei elucidated the specifics of his five-point plan, which aims to reshape the existing function of the monetary authority. Initially, the reform seeks to create a singular mandate by removing the BCRA’s existing conflicting objectives: financial and monetary stability, full employment, social equity, and economic development. As stated by the president, the bank’s “sole responsibility” is to maintain the value of the currency. To avert future inflationary surges, the reform will also impose a strict prohibition on the Central Bank financing government expenditures. The third point serves as a protective measure for BCRA’s leadership against arbitrary political dismissal, aimed at strengthening institutional governance. Fourth, the initiative imposes limitations on the allocation of dividends generated from the Central Bank’s earnings. Finally, the administration aims to completely abolish non-transferable bills. Milei explained that the initiative is part of a broader reform program that also includes the creation of a “fiscal anchor,” a mechanism that would trigger a government shutdown if Congress fails to restore balance to the public accounts. Economist Carlos Pérez, from the center-right think tank Fundación Capital, told that any measure cutting off central bank financing to the public sector is “welcome because it is a key factor explaining the very high inflation that Argentina has always experienced.” Upon Milei’s assumption of office in December 2023, the quasi-fiscal deficit — representing the interest disbursed by the Central Bank for the issuance of its own securities aimed at absorbing pesos from the market, which served as the primary source of money supply — was approximately 10% of GDP. Pérez characterised this decision as a “very helpful” instrument in the pursuit of reducing Argentina’s inflation rates. He drew parallels between the current scenario of escalating inflation and the events of the 1990s, a period characterised by the peso’s peg to the U.S. dollar. The economic regime, referred to as convertibility, was instituted to manage the hyperinflation that Argentina faced in the late 1980s. “Between 1992 and 2001— almost 10 years — inflation was less than 5% annually.”
Analytica director Claudio Caprarulo emphasised that any factor enhancing institutional strength, predictability, and aligned expectations concerning monetary policy “is important.” He also highlighted the significance of enhancing the agency’s institutional communication, given its historical reluctance to engage publicly. An example of this occurred in May, when agency officials held a press conference to present the First-Quarter 2025 Monetary Policy Report (IPOM, in Spanish), promising to hold new press conferences each time a new IPOM is released. However, he emphasised that reform of the Central Bank must be coordinated with the other political forces. “Just as Milei now wants to change it, Kirchnerism changed it previously, and another government may change it again in the near future.” Former BCRA Director Jorge Carrera remarked to the Herald that the functions of the BCRA and the intricacies of monetary policy are topics “that need to be discussed,” yet he expressed scepticism regarding Milei’s intentions for bringing them up at this juncture. “Since they lack the tools to solve the very complex problems of the current situation — such as the stagnation of 80% of the economy — the government’s strategy here is to generate these headlines that divert attention from the broader economic debate,” he argued. He stated that, in addition to discussing the issue of money supply, “we must also discuss the issue of (external) government debt” and its prior approval by Congress. “We’ve already seen that debt, in general, eventually leads to a crisis, which often results in an expansion of the money supply,” he said. During Alberto Fernández’s administration, a regulation was enacted stipulating that all external financing must first receive legislative approval. However, when it came time to renegotiate the agreement with the International Monetary Fund, the Milei administration exploited a legal loophole and enacted the new agreement by decree. Carrera noted that central banks with singular objectives have ceased to exist since the 2008 financial crisis. This is because the primary takeaway from that experience was reaching the conclusion that positioning those accountable for financial stability and regulation outside the central bank constituted a “poor institutional strategy.” Similarly, Caprarulo noted that “in certain defined situations,” it makes sense for the central bank to issue currency. Furthermore, he added that monetary policy “should not be constrained to the point where it cannot react to a crisis or an external shock,” such as the COVID-19 pandemic. He added that “the government is seeking to send a signal primarily to external creditors, both private and multilateral organizations.”
The director of Analytica emphasised that, given Argentina’s current situation, it is unrealistic to expect a monetary policy “that is completely detached” from the decisions made by the economy ministry. “It has to be aligned; otherwise, you’ve got a problem.” Argentina is currently navigating a precarious landscape, characterised by elevated inflation rates — projected by the market to revert to 30% annually by 2026 — alongside a concerningly low level of reserves. Estimates from Portfolio Personal Inversores indicate that net reserves as of July 21 amounted to a mere US$5 billion. The economy ministry and the BCRA concurred that enhancing both variables was a priority and that the optimal approach to achieve this was through collaborative efforts to prevent disruptions in economic policy planning. BCRA head Santiago Bausili even told the Herald in May that the monetary authority’s autonomy was not on the agenda at the moment. “The BCRA isn’t independent when it comes to coordinating the economic program; it’s fully aligned with the economy ministry. That’s much more important than trying to create a situation where someone resists financing the Treasury through money printing,” he stated at the time. However, Milei’s decision seems to be taking a contrary path, prompting enquiries regarding his potential actions should the legislation receive approval. “Milei’s proposal is full of paradoxes,” argued Carrera, who described Bausili as “the least independent central banker one could imagine.” It is widely recognised that current Economy Minister Luis Caputo was a long-time partner of Bausili at the consulting firm Anker prior to their appointments by the libertarian government in late 2023. “That is a world away from the idea of an independent track record,” Carrera stated. Caprarulo made the same observation: “How is the government going to guarantee the BCRA’s independence if its president is clearly part of the economy minister’s team?” And “Is this just a change in form, or will there actually be a change in how the government conceives of monetary policy?” asked Caprarulo, who wondered whether the central bank’s board of directors would see a change in membership if the bill were passed.
This would not be confined to the proximity — or impact — between the economy ministry and the BCRA. Milei has consistently affirmed his direct involvement in the Central Bank’s monetary policy decisions. One of the most significant cases was the phasing out of LEFI (liquidity treasury bills) debt instruments in mid-2025 — which triggered a currency run in the midst of the legislative elections. Milei himself confirmed that it was his idea. The economic team has underscored that its objective is to replicate Peru’s economic model. This concept highlights the significance of the Peruvian Central Reserve Bank, recognised for its independence. “Over the past 20 years, the president of Peru’s Central Bank has been Julio Velarde,” Carlos Pérez explained. On the other hand, Peru’s presidents since 2016 have remained in office for an average of approximately 1 year and 3 months. “Beyond the individual names, it’s related to respecting the necessary independence that the Central Bank must have,” Pérez stated. “The monetary and exchange rate regime transcends politics and operates beyond the current political climate.” Carrera stated that the Peruvian case “had the advantage of having someone who did their job very intelligently,” in reference to Velarde, in a context where “the political system had severe problems.” In any case, he clarified that one of the BCRP’s most important objectives is associated with financial stability — a goal that Milei seeks to eliminate from the charter. Caprarulo, for his part, underscored that there exist “political and social agreements that maintain [the BCRP’s autonomy] in place,” indicating that its independence is not solely contingent upon the organisational structure of the Peruvian central bank.