Milei reforms the Central Bank

 During the presidential election campaign, in a country ravaged by inflation, Javier Milei described the Argentine peso as ‘rubbish’ and promised ‘dollarisation’ – that is, the closure of the Central Bank. The libertarian candidate had become famous for literally smashing a model of the Central Bank with a sledgehammer on television. But now that he has been elected President of Argentina, he is consistently doing the opposite: restoring the value of the currency and the credibility of the Central Bank.

On Wednesday, the Chamber of Deputies approved a reform of the Central Bank’s statutes to guarantee its independence and resolve, including at an institutional level, the causes of high inflation. The reform was passed by a large majority – 144 votes in favour (the governing coalition and some members of the opposition) and 102 against (Peronists and the left) – and now requires the Senate’s approval. The core of the reform to the Central Bank’s Statute lies in Article 1, which sets out the institution’s objectives: “The primary and fundamental mission of the Central Bank of the Argentine Republic is to preserve the value of the currency”. This marks a return, therefore, to a single objective – as is currently the case with the ECB and as it was in Argentina in the 1990s. 

Currently, however, following the 2012 reform carried out by Kirchnerist Peronism, the Argentine Central Bank has six objectives: monetary stability, financial stability, employment, economic development and social equity. The problem is that over the last 15 years, none of these objectives has been even remotely achieved. On the contrary, Argentina has endured a long period of high inflation, financial crises, precarious employment, economic stagnation and social inequalities. However, the Argentine Central Bank’s total loss of independence became apparent in 2010, when President Cristina Kirchner – now in custody following a final conviction for corruption, but still the leader of Peronism – sacked Governor Martín Redrado because he refused to make the foreign exchange reserves available to the government.

Since then, and even more so following the 2012 constitutional reform, the Central Bank has lost all its autonomy. It has become a branch of the government, merely printing money at will and selling off all its reserves to cover the chronic fiscal deficit. The inevitable consequence, in the absence of fiscal consolidation, was the onset of high inflation, verging on hyperinflation in 2023 (220 per cent). The other part of Milei’s reform is the strengthening of the governor’s role, requiring a two-thirds qualified majority in both chambers for his removal, thereby guaranteeing his independence. Between 2012 and 2023, prior to the current governor, Santiago Bausili, there were seven successive governors of the Central Bank, each serving an average of less than two years. The statutory reform comes on top of a strengthening of the institution’s capital base, following the removal from the balance sheets of all liabilities transferred to the Treasury and the massive accumulation of reserves (13 billion dollars so far in 2026).

The fact that the man who was supposed to destroy the Central Bank is now attempting to rebuild its credibility is, ultimately, not a major contradiction in the eyes of voters. In the sense that Milei’s mandate was to tackle inflation, and this reform moves in that direction by prohibiting the Treasury from being financed through monetary means. The new charter follows in the footsteps of reforms implemented by other countries in the region that have successfully tackled inflation. The difference – and it is by no means insignificant – is that in countries such as Chile, Brazil or Uruguay, there has been a cross-party political consensus on the issue. In Argentina, there is not. Peronism has already announced that if it returns to the Casa Rosada, it will repeal Milei’s reform to bring the Central Bank back under the government’s control. The real vote on the Central Bank’s independence will therefore not be the Senate’s in the coming months, but that of the Argentine people in 2027.