A deepening dispute over President Cristina Fernandez’s plan to use billions of dollars in foreign currency reserves for debt repayments this year has rattled financial markets and stoked political tensions in Latin America’s No. 3 economy.
Fernandez sacked Central Bank President Martin Redrado by decree on Thursday, but a federal judge ordered he be reinstated a day later. The same judge also issued an injunction blocking the transfer of reserves to state coffers.
“The government, in keeping with the responsibility and respect with which we’ve handled this issue, has presented its appeals,” Cabinet Chief Anibal Fernandez told local television.
The turmoil at the central bank has highlighted political instability in Argentina just as Fernandez’s cash-strapped government seeks to charm investors and issue global bonds eight years after a massive default.
Argentine bonds, stocks and the peso lost ground this week due to investor concerns over the strength of Argentina’s institutions before a sovereign debt swap expected to be launched later this month.
Fernandez has defended the plan to use reserves, and government ministers have accused Redrado of plotting with the opposition to destabilize the government, a charge he denies.
Emboldened by gains in a midterm vote last year, opposition leaders have vowed to try to overturn the presidential decrees that set up the debt repayment fund and ousted Redrado.
