A government’s central bank is fundamentally a debt owner with a monopoly on government money creation and, more specifically, base money creation. A central bank’s balance sheet is basically an accounts receivable balance showing the status of the central bank’s lent or allocated funds or assets at a given date. If these assets represent probable economic benefits to the central bank, the benefits derive from the continued ownership of assets and the generation of interest while the principal is outstanding. In addition, a central bank’s open market operations are off-budget transactions that increase or decrease bank reserves, thus determining total bank reserves and total demand deposits amplified by the reserve multiplier. These operations ultimately determine the total money supply.
The Balance Sheet of Argentina’s Central Bank
Before Javier Milei’s inauguration as president in December 2023, Argentina’s central bank (BCRA) used to sell securities to commercial banks in order to withdraw money from circulation and offset the short-term inflationary impact of issuing pesos to finance the Treasury. However, what was intended to restrict the money supply became a major source of its increase. The BCRA paid monthly, weekly and even daily interest to banks on these securities. LELIQS, for example, created in 2018, ended in March 2024.
With Milei, the BCRA began by ceasing monetary issuance for the Treasury. And to further reduce this issuance, the government expanded debt issuance through debt swaps, which are voluntary or compulsory operations in which financial instruments are exchanged or converted for others with different conditions. To sum up, the Treasury’s LEFIS (only for banks) and LECAPS resulted from a BCRA debt swap to the Treasury and the BCRA’s discontinuation of PASES (shorter-term than LELIQS). Accordingly, LEFIS plus Treasury deposits in pesos at the BCRA increased during 2024, mostly between May and July, showing a greater variation than that of the official monetary base (M0).
Also in 2024, the BCRA succeeded in terminating most of the BCRA’s PUTS, for which, otherwise, it would have had to issue pesos to purchase Treasury securities from the holders that wanted to get rid of them before maturity.
Furthermore, prior to Milei, due to government intervention in the exchange market, the shortage of dollars led the BCRA to delay or reduce their delivery, resulting in the accumulation of defaults by importers. Milei’s BCRA addressed the situation by creating a dollar bond known as BOPREAL, which initially could only be subscribed by importers for the equivalent of their outstanding debts up to December 12, 2023. Following the approval of a new series in April 2025, the maximum payment term between BOPREALS is now October 2028. BOPREALS can also be subscribed in pesos, and almost all can be sold in the secondary market.
While the debt swaps from the BCRA to the Treasury normalized a part of the BCRA that had deviated from its natural status, the BCRA’s debt increases again with BOPREALS. This adds to the challenge of peso-denominated Treasury and BCRA securities held by Argentine companies, which in recent years bought these instruments as a way to maintain purchasing power. Meanwhile, from December 2023, the BCRA’s balance sheet went from US$143 billion to US$148 billion in April 2025, and its reserves went from US$19 billion to US$18.8 billion in March 2025
Exchange and Capital Controls
In April 2025, the government ordered an important reduction in exchange and capital controls that eliminated the various official dollar-peso exchange rates. The dollar price now fluctuates “freely” between two limits set by the BCRA, and the gap between the limits was set to widen by 1 percent per month at each end. Even so, Argentinians still have to pay a 30 percent surcharge for credit card purchases abroad. And the BCRA can still intervene in the exchange market—buying or selling dollars—so that the exchange rate does not exceed the limits, or in the middle according to some criteria. For instance, they can print pesos and intervene to prevent the dollar price from passing the lower limit.
While limited floating of the exchange rate is one thing, access to the dollar is another. Various restrictions remain for legal entities. Only banked individuals with formalized income can access the new dollar price. They may exchange dollars without limit through automatic channels, and with funds deposited on demand. But transactions over US$100,000 must be reported two days in advance, and only up to US$100 in cash per month can be purchased at the banks’ teller window.
Companies are now allowed to draw dividends for fiscal years beginning in 2025, so this flow of dollar demand may take up to one year to normalize. And for both pre-2025 retained dividends and pre-December 2025 importers’ debt, BOPREALS will be issued. Beyond companies, the limited access to the new dollar price includes other groups, such as informal workers and self-employed professionals without all or none of their income formalized and banked.
Thus, in a country where at least one-third of the economy is informal, potential demand for dollars is de facto drastically reduced. A parallel market still exists, and an “official” dollar price persists, because this price is not much more than a government-approved price.
The Need for Dollars
Virtually all governments favor their own currencies over any other with legal tender laws. However, Argentinians treasure dollars because of their country’s monetary history. For decades, they have turned down government money and endured a large collection of anti-dollar laws. And yet, by October 2023, Argentinians had 10 percent of the world’s circulating dollar bills. Hence the question of why their government wants so many dollars but never dollarizes.
Today, the dollar is legally allowed in most transactions, but it is still used mostly to save money. Milei has been saying that a currency competition already exists. But if that were true, not only the peso would be accepted for tax payments and other significant transactions, and there would not be as many restrictions on access to dollars as there still are.
In May 2025, Milei’s finance minister said that they need more circulation of dollars, and that they are going to do things so that people are much more inclined to spend their dollars. In fact, a previous amnesty program for dollar inflows into the banking system added some US$11 billion to the BCRA’s reserves during 2024, given that half of the dollar deposits go to the BCRA.
It is expected that a portion of the dollars spent will enter the banking system, and another portion will be exchanged for pesos to pay taxes and other subsequent costs, thus favoring the peso in the exchange rate. But if the peso loses less and less value relative to the dollar, it makes less and less sense for people to spend their dollars instead of the relatively revalued but still more inflationary pesos—unless the government continues to find ways to incentivize the use of dollars.
Finally, a lower quality peso is forcibly overvalued against a higher quality dollar. Peso demand is artificially increased, and Argentinians are encouraged or induced to part with their dollars. The whole process of government machinations works against the decrease in the peso’s purchasing power and against the increase in the exchange rate.
External Debt and the Financial Market
Along with the April monetary changes, the government sealed a new deal with the International Monetary Fund (IMF). The loan is supposed to “recapitalize” the BCRA, enabling the Treasury to pay a debt with the BCRA. The funds from the IMF and other agencies could add some US$23 billion to the BCRA’s reserves throughout 2025, helping the government to meet several commitments. This, together with the new exchange rate regime, provides crucial predictability to financial investors, encouraging continued demand for pesos for financial strategies. Indeed, the monetary changes also opened a door to foreign investors, offering opportunities for government securities in pesos such as LECAPS, which mature before the October 2025 legislative elections. Just in time, because the negative consequences for financial interests that an adverse electoral result for Milei could have should not be ignored. Additionally, the US$100 cash limit will contribute to making the inflow of foreign dollars available mainly to very few people—those who accumulate large amounts of pesos in the banks.
With a large external debt and such a widespread and diverse market of government securities, highly dependent on monetary policy, the Milei administration is heavily influenced by financial interest groups, both local and foreign. And so, with all the more reason, the change from internal debt in pesos to external debt in dollars is contrary to freeing Argentinians from debt slavery.
Inflation and Public Debt
After all this time, the size of the BCRA’s balance sheet remains almost the same, and so does its negative impact on ordinary people. Likewise, the BCRA has never ceased to play a decisive role in the exchange market, government securities have not stopped being issued, and neither the tangle of operations nor the issuance of new debts seem likely to end soon. Besides, they will continue to print pesos if maturing government securities cannot be refinanced.
True, the price inflation figures published by the government show a significant overall decline, but monetary inflation rose tremendously under Milei, given that M0 increased 240.3 percent until April 2025.
This seemingly contradictory display of inflation can be explained. Nevertheless, the BCRA will seek to continue “cleaning up” its balance sheet by “improving the quality of its assets.” But without repudiation of debts, and for a man who promised to abolish the BCRA, Milei’s presidency has actually fallen far short of ending all the damage caused by central banking and public debt.
