Brazil & Southern Cone - September 2026

During his election campaign back in 2023, President Javier Milei famously pledged he would shut down the central bank because it was doing more harm than good. While he has come to see that its existence brings some benefits, he is still bent on fixing what he sees as fundamental flaws, only this time through legislation, not closure. A bill proposed by the Milei administration, which was approved by the lower house of congress on 26 August, overhauls the central bank’s statutes, narrowing its mandate and introducing strict limitations on its financial activities. 

The overriding objective of the libertarian economist is to prevent politicians from using the central bank to print money for their spending projects and thereby drive up inflation. Argentine history is rife with such practices. In fact, the government is still trying to unwind debt the central bank had accumulated by lending money to the treasury. On 10 August the economy ministry paid US$781m to retire so-called non-transferable bills that the top monetary authority had on its books. These bills emerged in January 2006, under the government of former president Néstor Kirchner (2003-2007), to compensate the central bank for having used reserves to pay for liabilities the national treasury owed to the International Monetary Fund (IMF). The mechanism was then institutionalised.

According to estimates from the current administration, between 2003 and 2023, the national treasury received US$116bn in return for non-transferable bills, which cannot be sold or traded in the secondary market, offer low or no returns, and tended to be renewed. Even when the central bank had negative net reserves, it continued to give money to the treasury in exchange for the bills. Printing money in such a fashion to finance deficit spending was one of the main reasons why Argentine inflation rose steadily over nearly two decades.  

“Every time the state needed money, it dipped into the central bank’s coffers,” said federal deputy Santiago Pauli, head of the finance committee in the lower house of congress and a member of Milei’s La Libertad Avanza (LLA) party. Milei argued that “the central bank has been a tool that enabled theft through high-level politics”.

The proposed law specifically prohibits the central bank from lending money to the treasury or from transferring accounting profits. In a further move to help contain inflation, the monetary authority is to focus exclusively on preserving the value of the currency. The bill, which still requires approval in the senate, would eliminate the broader 2012 mandate introduced under the government of former president Cristina Fernández (2007-2015) that had added monetary stability, financial stability, employment, and equitable economic development as its goals. Such objectives were often used as a justification for not tightening monetary policy amid rising inflation as this would slow the economy and potentially endanger jobs.

In order for the central bank to be able to enforce its new mandate, and to shield it from future political pressure, the bill also heightens its institutional independence. Removal of the bank’s president or board would require a finding of a legal infraction, and a two-thirds vote in both chambers of congress, a step up from current requirements. The economy minister would also no longer participate in board meetings. “It will be armed with enough power to withstand any political attack,” Pauli said. 

Related bills

The government is also pursuing two related but separate reform bills. One aims to introduce government shutdowns in the event of prolonged budget deficits to enforce fiscal discipline, and the other is to deregulate capital markets so that the economy becomes less dependent on public funds. Downsizing the state by cutting expenditures, selling state enterprises, and deregulating the economy has been central to Milei’s economic policies. But one of the major shortcomings of the legislative proposals is that they are not enshrined in the constitution and therefore could be more easily changed by any future government with a majority in congress. Already, investors are concerned that Milei may not win next year’s presidential race, raising the prospect of the return of a more interventionist government.