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Argentina moves to legally prevent central bank from financing treasury

Argentina's executive branch will send to Congress a bill to legally prevent Banco Central de la República Argentina from financing the government's treasury.

In a press conference held March 14, central bank president Guido Sandleris said that over "the following weeks" a project would be sent to modify the central bank's charter with the ultimate goal of "strengthening the institutionality of our monetary policy."

The initiative had been sought by the previous central bank president, Federico Sturzenegger, who resigned in the midst of the currency crisis in 2018. Though he had announced in late 2017 an agreement with the government to gradually restrain the financing, the commitment was not legally binding.

In 2018, BCRA halted the monetary financing of the treasury's fiscal deficit for the first time in a decade, according to a report by the Argentine Institute for the Fiscal Analysis, known as IARAF.

The remarks by Sandleris did not specify whether the new law also would prevent the central bank from purchasing U.S. dollars that the treasury garners from foreign debt issuances — an indirect way in which the central bank has financed the government in the past. A spokesman from the institution did not comment on the details of the proposal.

Another proposed modification to the charter is to formally establish price stability as the BCRA's first priority. "It is important for this commitment to become an unavoidable mandate of this institution," Sandleris said.