Kristalina Georgieva praised Milei's economic policy and compared her to Messi

The Argentine government, led by President Javier Milei, announced today that it will unveil a major reform to the Constitution of the Central Bank of the Republic of Argentina (BCRA) through a national television broadcast. The initiative, which aims to redefine the bank’s role and strengthen its independence from executive authority, marks one of the key economic measures in Milei's second-half agenda. The presentation will take place at 8 p.m. local time on Thursday, July 30, with the content of the proposal set to be detailed before the project is submitted to Congress. The reform, developed in collaboration with the Ministry of Economy, the BCRA itself, and the Ministry of Regulatory Reform and State Transformation, seeks to modify the functions, restrictions, and governance structure of the central bank. Its primary goal is to prevent future governments from using monetary issuance as a tool to finance budget deficits. According to presidential spokesperson Adrián Ravier, the reform will be anchored around four pillars: establishing price stability as the sole mandate of the central bank, prohibiting financial support to the Treasury, strengthening the independence and stability of its authorities, and limiting the redistribution of accounting profits to the state. The current Constitution of the BCRA outlines the institution’s responsibilities and organizational framework, shaping its monetary policy. It mandates that the central bank promote monetary and financial stability, employment, and equitable economic development within the context of national government policies. This framework was established during the second term of Cristina Fernández de Kirchner in 2012. Milei argues that the coexistence of multiple objectives allows for discretionary monetary policy and blurs responsibility for inflation. The proposed reform would replace this broad mandate with a singular focus on preserving the value of money. One of the core elements of the reform is the prohibition of financing the state through monetary emission. The government plans to eliminate or significantly restrict the mechanism allowing the central bank to assist the Treasury financially, particularly through temporary advances. This includes modifying Article 21 of the BCRA’s constitution, which currently permits such transfers. The aim is to prevent the executive branch from relying on the central bank to cover fiscal shortfalls, even in times of market access difficulties. Milei has argued that monetary issuance used to fund budget deficits was a key driver of Argentina’s high inflation rates. By institutionalizing fiscal discipline, the reform seeks to limit future administrations' ability to misuse monetary tools. Another key component of the reform is enhancing the independence of the central bank’s leadership. While the current system allows for the removal of the president and directors with a simple majority, the new proposal requires a two-thirds vote from both chambers of Congress to remove officials. This change is intended to reduce political pressure on monetary policy decisions and ensure greater stability in the bank’s operations. The reform also introduces a regime of accountability and penalties for officials who violate the bank’s autonomy, including those who authorize its use as a source of funding for the state deficit. The reform also addresses the distribution of the bank’s earnings, restricting the payment of dividends derived from liquidity services. Milei emphasized that existing assets as of December 31, 2026, will be accounted for in units of account rather than currency, aiming to insulate the bank from inflationary pressures. The proposal also limits or prohibits both direct and indirect financing of the Treasury by the central bank, including the use of instruments such as non-transferable notes. The reform has drawn mixed responses from economists and analysts. Some, like economist Federico Glustein, have warned that while the initiative aims to restore the central bank’s independence, eliminating all mechanisms of state intervention could leave the institution vulnerable in times of crisis. He cautioned against passing from one extreme to another, arguing that some degree of flexibility is necessary to address exceptional circumstances. Others, however, see the reform as a necessary step toward restoring fiscal discipline and long-term economic stability. Meanwhile, the International Monetary Fund (IMF) has expressed support for Argentina’s economic path under Milei. IMF Managing Director Kristalina Georgieva praised the country’s improved macroeconomic indicators, noting that Argentina has moved from a primary deficit to a surplus, reduced inflation from over 210% to approximately 30%, strengthened foreign reserves, and restored market confidence. She highlighted progress in reducing poverty from 50% to 20% and boosting investment through the RIGI program, worth nearly $45 billion. Georgieva emphasized that the next phase of the economic plan should focus on ensuring that recovery benefits reach the broader economy, especially small businesses and households. As the reform moves forward, the government expects to submit the bill to Congress in early August. The legislative process will likely begin in the Senate, though the exact timing and procedures remain unclear. The reform represents a significant shift in Argentina’s economic strategy, reflecting Milei’s commitment to structural changes aimed at stabilizing the economy and curbing inflation. With the central bank’s new constitutional framework, the government hopes to establish a more predictable and independent monetary policy environment, reinforcing its broader vision of economic transformation.