If at first you don’t succeed, ram it through. When Argentine President Cristina Kirchner issued a decree earlier this year to pay US$6.6 billion in debt with Central Bank reserves, it caused an uproar. Congress objected, the Central Bank president rebelled, and the courts froze the funds. Even after Kirchner sacked the Central Bank head, the courts still wouldn’t unfreeze the cash, and Congress wouldn’t cooperate.
So she did what any good sore loser would do, which is cancel the first decree and immediately issue a second one that’s exactly the same:
Argentina’s central bank transferred $6.6 billion in reserves to accounts belonging to the Treasury that the government will use to make payments to multilateral lenders and bondholders, an official at the bank said.The bank transferred $2.2 billion to pay debt owed to multilateral lenders and $4.4 billion to pay bondholders, according to the official, who can’t be identified because of bank policies. The board of directors approved the transaction, following a decree ordering the transfer that President Cristina Fernandez de Kirchner announced today in a speech in Congress.
By ramming through the use of reserves instead of budgeted funds to pay the debt, Kirchner simultaneously weakens the currency by removing some of its backing, increases the risk of inflation by freeing up budget funds for spending domestically, and adds another example to The Economist‘s scathing critique of the Kirchners’ strongarm tactics.