“The bank’s purpose is to promote, to the extent of its powers and within the framework of the policies established by the national government, monetary stability, financial stability, employment and economic development with social equality.” Article 3º, Charter of the Charter of the Central Bank of Argentina.

General guidelines

In December 2023, Argentina was facing a serious macroeconomic crisis: uncontrolled inflation, fiscal, monetary and external imbalances, negative reserves and a complex set of obstacles and regulations that prevented the normal development of economic activity.
Faced with this scenario, a stabilization plan was implemented based on a solid fiscal anchor, accompanied by a three-phase sequential strategy to correct monetary and exchange rate imbalances, without predefined deadlines but conditional upon the achievement of certain macroeconomic milestones.

The first phase focused on eliminating the primary fiscal deficit and its monetary financing. The BCRA’s interest issuance was also reduced and its balance sheet was cleaned up by transferring part of its interest-bearing liabilities to the Treasury (LECAPs). In addition, the valuation of BCRA assets was adjusted in accordance with current accounting standards. In the foreign exchange area, the exchange rate was frankened, a 2% monthly crawling peg was established and a transparent payment regime for imports was implemented, complemented by the issuance of BOPREAL to regularize the commercial debt.

As a result, inflation fell, reserves began to recover and activity showed signs of recovery, which enabled the second phase to begin.

In this second stage, a strict limit was set on the monetary base and the surplus of pesos was sterilized with sales in the financial markets. The BCRA’s interest-bearing liabilities were completely eliminated and replaced by Fiscal Liquidity Bills (LEFI) issued by the Treasury, which became the main absorption tool. The balance in the foreign exchange market was strengthened by the asset regularization scheme, which amounted to more than USD23 billion, reinforcing reserves and private financing in dollars.

Thanks to the new program, by the end of 2024 the economy showed clear signs of stabilization: monthly inflation fell from 25% in December 2023 to 2.7% in December 2024; the exchange rate gap narrowed to below 10%; activity rebounded by 7.8% since April; and social indicators began to improve.

Thus, the conditions were created to move towards the third phase of the plan: the elimination of the CEPO and the adoption of a more flexible exchange rate regime.