The Banco Central de la República Argentina announced on 11 July 2024 that it would close its passive repurchase window with effect from 22 July 2024. The passive repo facility had allowed commercial banks to deposit excess liquidity at the central bank in return for interest payments, and those obligations had become a source of what Argentine economists term the quasi-fiscal deficit — losses created by the central bank itself, distinct from the fiscal accounts of the Treasury. The closure of the window removes this mechanism from the monetary system.
The reform is part of the balance sheet restructuring being pursued by the BCRA under the economic programme of President Javier Milei, who took office in December 2023. The Milei administration has identified the elimination of all central bank money creation as a foundational objective. By removing the interest-bearing channel through which excess bank reserves generated new peso issuance, the authorities aim to curb monetary base expansion.
THE QUASI-FISCAL DEFICIT
The central bank's interest payments on its stock of remunerated liabilities — primarily the passive repo facility and other short-term instruments — created new money automatically as interest accrued, without any corresponding decision by the fiscal authority.
Under the restructuring, the function of absorbing excess commercial bank liquidity is being transferred to instruments managed by the Treasury rather than the central bank.
WIDER REFORM PROGRAMME
The closure of the passive repo window is one of several reforms that the BCRA and the Milei administration have been implementing since December 2023. The overall programme combines fiscal adjustment with structural changes to the central bank's operating framework and a managed approach to foreign exchange and reserve accumulation.
The BCRA indicated that the change would take effect approximately ten days after the announcement.