Argentina's Chamber of Deputies Passes Bill to Prohibit Central Bank Financing to Treasury, Inflation Must Decrease by Stopping the Printing Press for the Treasury

The Argentine Chamber of Deputies passed an amendment to the Central Bank Organization Law promoted by President Javier Milei, prohibiting the central bank from financing the treasury directly or indirectly. The bill now goes to the Senate.

The vote was 144 in favor, 102 against, and 9 abstentions, with the session dragging from noon to midnight. The text establishes the sole responsibility of the central bank as maintaining the value of the national currency, removing multiple objectives such as employment, social equity, and financial stability that were included in 2012. It prohibits temporary advances to the treasury, loans to the nation and provinces, direct subscription of government bonds in the primary market, and using old channels like non-transferable bonds for financing; profits remitted to the treasury are limited to realized profits and must be declared for debt repayment. Milei stated this is to eliminate "printing money to support politics," aiming to reduce annual inflation from approximately 211% in 2023 to an estimated range of about 30%. He wants to prevent the next government from reopening the printing press. On the same night, "Fiscal Innocence II" passed with 139 votes to 110, expanding the thresholds for tax evasion and hidden wealth, also awaiting the Senate's approval.

The Senate's ruling coalition does not hold a majority and must seek additional votes. Some opposition members have framed the reform as consolidating the current president Santiago Bausili's arrangements. The International Monetary Fund previously listed strengthening the central bank's independence as one of its conditions. The government still includes zero fiscal deficit and external debt authorization in the 2026 budget. The last major amendment to the central bank's charter was in 2012. After the vote, Milei stated the next step is to go to the Senate and "continue the fight."

The printing ban does not immediately change reserve figures; it alters the financing menu for future deficits: the treasury can only issue bonds, raise taxes, or cut spending, and cannot open temporary accounts with the central bank. The exchange rate of the peso and risk premiums will be repriced based on market belief in whether the ban can pass the Senate.

Mechanically, this is a legislative expectation trade, not an immediate halt to printing. Buyers are foreign investors betting on Argentine assets, looking at institutional locks, and bondholders, while sellers are the treasury accustomed to living off temporary advances. If the Senate approves, funds will shift from the central bank's balance sheet to the bond market and fiscal spending cuts. Beneficiaries will be the purchasing power of the national currency and the narrative of reduced spending, while those under pressure will be provinces and potential spending items reliant on central bank financing. The 144 votes only complete half the journey; a Senate rejection or amendment will immediately reflect on the national risk index. Inflation has already decreased before the ban legislation, relying on executed fiscal contraction; the bill aims to lock in the next political cycle.

In supplementary terms, temporary advances have been a standard interface in Argentina's inflation cycle for decades; this time, the interface is being removed from the charter rather than announcing a halt to all monetary operations on a specific date.

Source: Public Information