He Banco Central arranged for the issuance of other $150,000 million as Temporary Advances al National Treasure, which has occurred just 72 business hours after receiving $140 billion to finance a growing fiscal deficit. This is in addition to other transfers previously received by the Treasury, which they had already consumed 99% of the planned assistance goal in the agreement with the IMF.
This was from $373,000 million for the first semester, because it had already received transfers for $100,000 million in April and $130,000 million in March. With this new twist, the government has breached another explicit goal of the agreement with the IMF.
Economists have pointed out that accelerating issuing money in the midst of an inflationary escalation is counterproductive. In April, inflation reached 8.4% and expected to reach 9% in May. Luis Secco, an economics specialist, points out that in just six business days in May, there were $290,000 million in Temporary Advances from the BCRA.
Dollar and interest rates: how the unexpected 8.4% inflation will impact
Juan Ignacio Paolicchi, economist at the Empiria consultancy, considers: “The machine for printing weights continues to operate at maximum power. Overall, inflation did not give 8.4% in a month (which is equivalent to 165% in a year) and the issue has nothing to do with it”. He estimated that “with the new shipment they have already used $520,000 million in the year when the goal with the IMF until the end of June was somewhat below $373,000 million.”
He said that the economic team “adds another failure to meet targets after missing reserves in the first quarter and probably the prosecutor also fails to comply. Completito. We will have to see what enters into the current renegotiation.”
For his part, the economist Salvador Vitelli of the Romano Group warned: “To the extent that the shipment is not returned in the remainder of the current quarter, we will be facing another goal failure.”
The issuance of money is linked to the impact the drought has had on tax collection associated with foreign trade, which has meant that government revenues do not keep pace with inflation and fall in real terms. The Government’s efforts to adjust spending to this level of income have been insufficient, which has led to an increase in the deficit.
The problem is that the sustained emissionin the current context of rising inflation, is what drives the bad expectations about a possible higher local currency depreciation.
The Central Bank extends the dollar stocks to “gift cards” purchased abroad
The Central Bank, aware of the impact that this release has on the economy, is trying to sterilize (withdraw from the market) part of what was issued. However, this has led to a increase in remunerated debt (and at an ever-increasing rate), in a context in which it continues to lose reserves (they are in negative territory if they are measured in net terms and at the lowest level in the last seven years if the total is taken from all types of loans) and damage your assets.
In addition to issuing Temporary Advances, the Central Bank issues money to pay interest on its debt ($2.8 trillion were released through this route in the first quarter of the year), buy reservations (through which it withdrew some $450,000 million given the more than US$3,200 million of its reserves that it has lost, but which should become expansive in the coming months since it no longer has much to sell), make more expensive purchases due to the imposition of the soybean dollar or PIE III (some $140 billion more), and rescue bonds to sustain their prices. The issuance of money in all these areas has led to an increase in Central Bank debt and a loss of reserves.