The increase in issuance of weights by the government not only fed inflation, but also generated additional pressure on the Central Bank to increase its portfolio of absorption instruments. This led to considerable growth in the interests of the BCRA debtwhich have already exceeded the $2 billion in the first quarter of the year. The situation poses a challenge for monetary policy makers and requires effective measures to control the negative effects on the economy.
At the end of March, the accrued interest for the Leliq and passes amounted to $2.093 trillionaccording to data from Bloomberg Onlineto. In January, it was more than $701,000 millionin February $590,000 millionand finally in March they exceeded $801,000 millionleaving a monthly average of almost $700 billion in the first quarter of 2023.
The consequences of the new soybean dollar
“The agricultural dollar It’s a new weight bomb. The soybean dollar is largest monetary issue because the BCRA issues for $300 to buy a dollar and then absorbs pesos when it sells dollars for imports at $211, that is to say that for every soybean dollar it is issuing $90. This aggravates inflation, in fact, the inflationary acceleration registered in the first quarter It is the product of the issue that was generated with past editions of the soybean dollar,” he said. George HillChief Economist of the Institute for Argentine Social Development (IDESA).
The consultants notified the Central Bank that they expect 3-digit inflation
A report from that institute states that: “The scheme produces a accumulation of serious distortions and is hardly a palliative in the face of the lack of foreign currency in the Central Bank, since, although it will get new currencies, does not discourage the overdemand of dollars caused by the low value of the official dollar ($210)”.
According to the document and Colina’s own words, the soybean dollar “forces” to increase issuance, which, added to the inflationary impact of this “excess”monetary, induces the BCRA to subscribe Leliq with the deposits of its clients. “The enormous liability that the Central accumulates in Leliq is the inflation that will be suffered in the future”, warns IDESA.
“While a general devaluation would have immediate inflationary impacts, with the dollar-soybean and the issuance of Leliq the inflationary impact is deferredit is not that it disappears ”, adds the document.
Soybean dollar: an ingenious instrument to defer problems
According to the analysis, The soybean dollar postpones the difficulties of the Argentine economy, particularly a greater inflationary acceleration. But it does so at the cost of aggravate competition problems to the rest of the exporters, who do not access this preferential exchange rateand stimulate the demand for foreign currency for imports and spending abroad, by keeping the official exchange rate low.
“Definitely, The soybean dollar does not aim to bring stability in the parallel prices, but rather seeks to capture some dollars because the BCRA is in a desperate situation. Anyway, the higher the issue, the higher the inflation and the more pressure on exchange rates,” Colina warned in statements to this medium.
The State spends more on Leliqs interests than on retirements
“The reality of recent years shows that the governments of Cristina Kirchner, Let’s change and the current one, strongly appealed to use the same tool: the Leliq to postpone the inflationary consequences of a public sector chronically deficient”, maintains the IDESA report.
And he adds: “This suggests that, although they are not made explicit, in Argentina there are ‘State Policies’. Among the most important and harmful are those of maintaining the chronic fiscal deficit and using Leliq to defer its inflationary consequences”.
Leliq: Future Issue
“The remunerated debt exceeds the $12 trillion, equivalent to 230% of the monetary base. It is logical that these liabilities are growing exponentially, since the BCRA is financing spending through various channels. And then, so that the issue does not go directly to prices, it sterilizes it with debt that pays increasing interest“, he pointed Eugenio Marichief economist of the Libertad y Progreso Foundation, in statements to PROFILE.
“We must not forget that for the BCRA this is, essentially future issue. The problem is that, within this scheme, the interest rate of the debt itself is a determinant of the issuance and of future inflation”, added Marí.
One by one, all the products that are included in the $300 “agro dollar”
“To this we must add the monetary shock that is the agricultural dollar. To buy foreign currency, the BCRA has two alternatives: issue or borrow. We rule out that it will bet on the second, which will take the remunerated debt stock to about $14 trillion and 250% of the monetary base”, Marí commented in line with what was stated in the IDESA report.
“For now, this nominal race is anchored in the expectation of a change of government. But the dynamics of the liabilities mean that, for the government that takes office in December, sthe recomposition of fiscal accounts and credibility is even more urgent through the implementation of structural reforms. Otherwise, it will be impossible to refinance this debt,” concluded the Libertad y Progreso economist.
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