MercoPress. South Atlantic News Agency

Argentina votes this week on the reform barring the central bank from funding the Treasury

The bill also prohibits the purchase of national, provincial or municipal government bonds on the primary market, the mechanism through which the central bank has historically financed the Treasury

Argentina's Chamber of Deputies will on Wednesday debate the reform of the central bank's charter promoted by Javier Milei's government, which bars the monetary authority from financing the fiscal deficit through money creation and restores preservation of the value of the currency as its sole objective.

The bill removes the five functions added to the institution's mandate by the 2012 reform — among them promoting employment and economic development with social equity — and replaces them with a single objective. It also prohibits the purchase of national, provincial or municipal government bonds on the primary market, the mechanism through which the central bank has historically financed the Treasury.

Central bank governor Santiago Bausili and deputy governor Vladimir Werning defended the initiative before the budget and finance committees. They argued the purpose is to shield the institution from the political pressures of successive administrations and to consolidate a structure aimed at preventing a return to high inflation.

The same session will take up the bill known as Fiscal Innocence II, which expands a simplified scheme designed to bring undeclared assets into the formal system, estimated by the government at some 170 billion dollars. It removes the annual income and asset ceilings that limited access to the scheme and cuts by 25% the penalties for individuals and small and medium-sized companies that sign up. Opposition lawmaker Victoria Tolosa Paz, of Unión por la Patria, has called for an article barring officials of all three branches of the state from accessing those benefits.

The special session was called for midday by La Libertad Avanza bloc leader Gabriel Bornoroni, with backing from nine parliamentary groups including PRO, the Unión Cívica Radical and blocs answering to provincial governors. The governing coalition believes it has the votes to secure approval in the lower house.

The debate comes against a backdrop of deteriorating financial indicators. In August the country risk premium passed 470 basis points and sovereign bonds gave up much of their first-half performance, in a move not mirrored in other emerging markets. Arrears on credit to individuals reached 17.5% of total lending in June, according to a study by Universidad Austral and the consultancy Eco Go. A recent survey puts the share of Argentines identifying as opponents of the government at 52%.

Milei will chair a cabinet meeting on Monday, the first since July 9, and will receive deputies and senators on Tuesday ahead of the vote.