Just hours before the start of 2024, the Central Bank presented its roadmap for this year, focusing on possible unification of the exchange rate and the “normalization of the money marketThe organization chaired by Santiago Bausili has thus achieved one of the points established by its Organic Charter and has carried forward its “Objectives and Plans” for the next twelve months.
In the document, the Center takes stock of the measures adopted in the first weeks of Javier Milei’s mandate and also makes projections on what they will be. the next steps to follow. Among the definitions it seems that, after the jump in the exchange rate in December, this month the premise of letting the exchange rate run at pace could be maintained 2% monthly, which raises doubts in the City. At the same time, the organization emphasizes the need for it “dismantling trade restrictions”, although it does not provide further details on how it would proceed and what the deadlines would be for dismantling the stockpile.
In line with the arguments presented by President Javier Milei, by his Minister of Economy Luis Caputo and with what Bausili himself explained in public and private to various actors in the financial sector, the Central document establishes the “tax problem” as the mother of all battles of the Argentine economy. At the same time, she takes stock of the economic inheritance received, focusing on fragility of international reserves.
“The financing needs of the National Treasury and interest rate policy have not only sharply increased the liabilities of the BCRA and deteriorated its composition, but also affected the assets of its balance sheet. The use of International Reserves for payment of debts and the sale of foreign currency on the official market and financial markets has reduced international reserves”, highlights the work and shows that the organization’s coffers have collapsed by more than 56,000 million dollars in the last five years. Furthermore, a record was set as of December 11, gross reserves amounted to 21,000 million dollars and net reserves a negative balance close to 11,000 million dollars.
The document examines the changes made by the Foreign Trade Organization and the creation of new debt instruments to erase the million-dollar balance accumulated with the importing sector. Through these bonds, “the BCRA offers a tidy solution resolve the crisis generated by the accumulation of importers’ trade debts at levels that are difficult to manage in the short term with the stock of available reserves, acting as a bridge towards the accumulation of reserves linked to the trade balance surplus expected for the next few years.
The BCRA argues that the “honesty” of the exchange rate and the elimination of barriers to access to the foreign exchange market are fundamental to its economic policy: “they generate an incentive for production and export and a disincentive to continue to artificially increase prices.” imports.
“A real improvement in the trade balance will be an essential driver in the process of recovering the level of liquid international reserves of the BCRA,” the work emphasizes.
The release of the shares and a possible unification of the exchange rate appear as the North’s favor for this policy, although the Center has avoided giving deadlines on when this scenario could be realized.” restoration of credibility will not be complete until the correction of inherited monetary imbalances, the resolution of trade debts for import payments and the recomposition of international reserves allow progress in the elimination of exchange and capital controls still in force and, after an orderly process normalization, in the definitive unification of the foreign exchange market”, reads the report.
Another of the passages of the work focuses on “stagflation” which Javier Milei has spoken about many times. After the elimination of the Leliq as the reference letter of monetary policy and the subsequent lowering of rates, the organization advances: “The BCRA will continue to direct all monetary policy tools to achieve monetary stability and reduce inflation. And ” will continue to constantly monitor the evolution of the general price level, the dynamics of the foreign exchange market and monetary aggregates for the purposes of calibrating the reference interest rate and managing liquidity conditions.”
Finally, the organization referred to the need to expand credit and broaden financial inclusion. “Macroeconomic stabilization will once again allow a genuine supply of credit to the private sector, an essential input to finance investment and growth.”
Source: Clarin
