MercoPress. South Atlantic News Agency

Argentine courts ratify the freeze on use of Central Bank reserves

The rulings are a setback for Mrs. Kirchner’s plan to repay debts maturing this year and definitively solving the pending bonds’ dispute

Argentina’s Federal Contentious Administrative Court Friday ratified the suspension on the use of the Central Bank foreign currency reserves to payout public debt, according to judicial sources in Buenos Aires.

Likewise, the court modified the injunction filed by Judge María José Sarmiento over the DNU emergency decree that ordered the dismissal of Central Bank Governor, Hernán Martín Pérez Redrado, as the court has established that the Executive branch does not have the ability to appoint the Governor of the Central Bank until the Bicameral Committee gathers to debate the fate of Redrado, who was reinstated in his job by a judge a day after president Cristina Fernandez de Kirchner sacked him.

The court, rejecting an appeal by the government of Mrs Kirchner, also upheld a previous injunction that blocked her plans to transfer 6.6 billion US dollars in Central Bank reserves to the treasury to pay the public debt.

Meanwhile, the precautionary measures lodged by the opposition: right-centre PRO Deputy Federico Pinedo and the head of the Radical Party Deputy Gerardo Morales, to suspend the use of CB reserves to pay the public debt, were confirmed Friday by the Judges available as legal holidays are on.

Thus, Judge Sarmiento's ruling got reconfirmed along with the suspension of DNU emergency decree 2010/09 as “it violates the National Constitution as the emergency and necessity circumstances named by the Executive were not justified.”

Mrs. Kirchner asked lawmakers earlier this week to discuss her firing of Redrado, who opposed her plan to use the reserves to service this year's debt obligations, in an effort to defuse a deepening legal and political row.

The Bicameral Committee is expected to meet on next Tuesday on Redrado's fate, but the Argentine Executive stressed that any recommendations it makes will be nonbinding.

Mrs. Kirchner’s bid to tap part of the bank's 48 billion US dollars in foreign reserves has sparked legal challenges and political tension, rattling financial markets and raising concerns that a planned bond swap could be delayed.

Government ministers, however, say the turmoil at the Central Bank would have no effect on the planned swap of 20 billion USD in defaulted bonds, which the Argentine government is expected to launch in the next few weeks.