The increase in rates makes the interest paid by the Central Bank more onerous. Photo: German Garcia Adrasti
According to the estimates of the National Budget Office, the payment of interest on the remunerated debt of the Central Bank is equivalent to 130% of the amount made for the payment of Retirement and withdrawals.
The data comes from a report by the Fundación Libertad y Progreso. There it is recorded that starting from 11 August the Central has accounted for its balance with $ 7 billion in remunerated liabilities. This amount includes Leliq, subscriptions and Notaliq.
The data ends up burying the promise of Alberto Fernández’s presidential campaign, who assured him that he would put an end to speculation on liquidity letters (Leliq) to allocate those resources to the payment of pensions. “I don’t want to live in a country that pays what it pays to banks in interest“Fernández said during the campaign with Cristina Kirchner.
Leliqs are the tool with which the Central Bank removes pesos from circulation. In these three years, Leliq’s ball doesn’t stop growing. This was reinforced by interest rate increases. The last jump took place a week ago, when the market reference rate went from 60 to 69.5%.
While the repo rate – another monetary regulation instrument issued by the BCRA – had a similar increase, from 46.5% to 64.5%.
With this rate hike, “the interest accrued by the Central Bank’s remunerated stock of debt exceeds $ 401 billion per month“, score from Libertad y Progreso.
In addition to stating that this monthly amount equates to 130% of pensions, the report details it it represents 280% of the amount allocated to the payment of pensions; almost 6 times what was done for the payment of family allowances; 5.2 times the amount intended for the payment of Energy Contributions; nearly 11 times the amount paid in transport subsidies; more than 11 assigned to National Universities; and 7.5 times that assigned to the Provinces.
Aid to the Treasury
Eugenio Marí, chief economist of the Fundación Libertad y Progreso, explains that “the increase in the amount of interest on the central bank’s debt responds to the fact that the entity has been extensively dedicated to financing the Treasury deficit”.
“In other words, the Central Bank pledged its balance to help the treasury. Then, to sterilize some of the monetary issuance, the BCRA issues an interest-paying debt, like the Leliq. The problem is that the BCRA today already has serious problems with its balance sheet, so continuing to issue debt is counterproductive, ”says Marí.
“The underlying problem is trying to finance spending with spurious emissions” adds Mari.
Leliq’s ball
Leliq’s ball grows faster than pensions, which have been losing to prices in recent years. A report by GMA Capital details that, in relation to 2019, the mobility adjustment formula has entailed an 11% decline in real terms.
“Adjusting to the income and the average gross salary of the previous quarter, this increase does not represent an improvement in real terms compared to the inflation that has always pushed the accelerator”, they specify.
GMA Capital warns that “the central bank today has more commitments with banks through Leliq and passes, at an interest rate of almost 100% per year, compared to banknotes in circulation plus reserves”.
“Today the remunerated liabilities are 157% of the base. This ratio is the highest since 1989. For this reason, the sustainability of the quasi-fiscal deficit will become the focus of public debate. “
AQ
Annabella Quiroga
Source: Clarin
