This Friday the central bank bought 1 million dollars and thereby limited the loss of the first three days of the month to 35 million dollars. With no sign of improvement in currency regulation any time soon, the government is facing another month in which the shortage of dollars will impact imports and economic activity.
Although Sergio Massa’s team started the week strengthened by the announcement that the Monetary Fund agreed to relax the reserve target for the first quarter of this year, the news faded as the week progressed for two reasons .
The first was that, despite the promises of the Economy, the IMF has not formalized the modification of the objectives. What has been orally announced so far is that the March 31 net reserve accumulation target, set at $7.7 billion, has been relaxed. Today, Central has $4,500 million in net reserves.
“They are closing the reserve target program for the year with assumptions of a decrease or increase in exports. I assume that would have ended today and they would announce it on Monday,” they said from Economy. As such, there are no details yet on what this flexibility is or when it will become official.
The second reason is that although the easing of reserve targeting relieves short-term pressure, it does not solve the central problem, which is the chronic shortage of dollars affecting the economy.
From the consultancy firm LCG, they suggest that February culminates with a decline in $2.7 billion of net reservesdue to currency sales of nearly US$1,000 million, as well as payments to international organizations for the same amount.
So far this year, the decline amounts to $6 billion product of both debt payments (US$3,000m to the IMF and US$1,000m to private bondholders) and currency sales of US$1,100m. Looking ahead to March, this will be partially offset by a net IMF outlay of US$2.5bn.
Thus, the dollar shortage has no way of being reversed. “Inflation remains high and drought hits business in what outlines the year as one of recession and high inflation“, argues LCG.
“The reserve target by the end of 2023 of $12 billion seems impossible, with the 4.5 billion dollars current reserves in the coffers of the Central Bank”, underlines the economist Fernando Marull.
The shortage of foreign currency puts pressure on the foreign exchange market. In February, the Central Bank had to sell $889 million to contain the dollar and keep the official exchange rate from escaping. It was the month’s worst result in two decades.
Last month agriculture cleared just US$653 million and Central had to allocate $260 million to pay for gas imports.
The decline in sector severance payouts was felt by funding, which rose 82.5% last month, a 9.5% decline in real terms from February’s inter-year inflation.
Now the government is threatening to send AFIP to farmers who, given the effect of the drought on their incomes and with the certainty that the government will eventually roll out a new version of the soybean dollar, prefer storing grain in silo bags rather than selling it at current prices.
“Because of the dollar shortage that implied the sale of $5,000 million in soybean stocks in 2022 on soybean 1 and 2 dollars, the government has asked the IMF to make the targets more flexible,” concludes Marull.
“This is the worst year with BCRA foreign currency accumulation inventories. Stability in foreign exchange intervention over the past 10 business days would indicate an increase in the tourniquet for import payments. Something that we hope will consolidate in the scenario of severe drought”, underline from Aurum Valores.
AQ
Source: Clarin
