In this way, and with a combination of 2 in 1 in the same sentence to criticize Martín Guzmán and Miguel Pesce, the Minister of Economy, Sergio Massa, reported last Friday to the difficulties find to stabilize the economy. Inflation in April was the highest in 30 years (8.4%) and the consensus of analysts calls for a higher figure for May.
Massa stressed that it was a mistake not to have absorbed the excess banknotes that had been injected to counter the contractionary effect of the pandemic through an expansionary monetary policy, supporting the Guzmán-Pesce pairing. But this is also worth noting Massa does not stop financing (the Treasury deficit) with the Central Bank in a context of closed international markets and a domestic capital market practically limited to what the captive actors, the banks, lend them.
The facts are as follows:
– Without funds, the government last week resorted to two transitional advances of 300,000 million dollars to cover financial needs. ATs are credits that the BCRA grants to the Treasury when it cannot be financed either by taxes or by debt issuance. Massa did this. The government of Alberto Fernández is the second that has most involved in this type of practice in the last twenty years. TAs for the month hit $440,000 million and jump to $670,000 million on the year. It is worth mentioning that the agreement signed with the IMF asks Argentina as a condition for accessing the loan dollars, that TAs do not exceed $372,800 million for June (this does not necessarily imply a default because it could be canceled between now and June).
– $580,000 million in peso debt accrued during the week and Finance got $770,000 million. Public entities and banks have increased their exposure to finance the Treasury. “In net terms, private investors would have withdrawn $116,600 million in May and more than $500,000 million since the beginning of the year. In other words, private financing has run out”, states the consultancy firm Eco Go in a document. “Now the Central Bank must issue not only to cover the deficit (1 trillion dollars in the first four months) but also to debt to the private sector”.
– For consulting firm 1816, Pesce’s total funding in Massa so far this year is $1.9 billion. “Between transitional advances ($670,000 million) and purchases of peso bonds on the secondary market ($740,000 million of the T2X3 bond, $300,000 million of the TDL23 and $230,000 million of other securities), we calculate that The BCRA has already funded the Treasury to the tune of $1.9 trillion a year. According to our calculations, all the net financing that the Ministry of the Economy obtained in its tenders during the year (930,000 million dollars) was provided indirectly by the Power Plant through purchases of T2X3 and TDL23 from public bodies”.
– He to roll, the participation of private companies that are not banks in the tenders for the Economy is declining. In January it was 107.5% according to Eco Go estimates. This week it would have reached just 45%. “Little by little the private sector withdraws as a creditor and the financing of the Central becomes essential”.
So why is Massa criticizing the monetary issue on Friday if in the same week there is recourse to self-financing?
The answer may be that the former does. for ‘politics’ (look for a justification as to why inflation cannot go down) and second, for survival: without IMF aid, reserves and private funds, only the BCRA is at hand.
The government seems to be chasing its tail with funding. It is that Massa resorts to Fish and Fish to bank deposits which each time have more Leliq. So the private sector has less and less ability to lend.
With data updated up to March, 36% of the assets of the financial system are accounted for by Leliq and repurchase agreements, while 17% by public securities. “In consolidated terms, the stock of government bonds, including the BCRA, in the financial system went from representing 29.4% of total assets in December 2019 to 53% in March”, according to a report by GMA Capital. “Other side? A lower level of credit for the private sector. Measured as a percentage of assets, private lending averaged 44% between 2016 and 2019. It has never left a downward trend since January 2020, and as of March 2023 it has come to account for just 27.2 % of financial system assets.
Eco Go points out that the period in which the government “was able to finance itself in pesos with the private sector was relatively short-lived and was important mainly in 2021, but outside of it, in 2020, at the end of 2022 and so far in 2023, the Central Bank financing is fundamental to understanding how the current administration has been financed, whether through Temporary Advances, profit transfers, non-transferable bills or the repurchase of government bonds, the BCRA has already funded more than 85,000 million dollars”.
Therefore, and facing the election, there is no reason to think that this will change. Massa, as long as he remains Minister of the Economy, he will continue to lean on the central bank issue despite any criticism he may express from his speech, as he did on Friday.
Source: Clarin
