This decision, scheduled for Thursday, arrives at a time of inflection, marked by A strategic turn of the Executive that combines the flexibility of the exchange rate, the increase in interest rates and the purchase of reservations by the Treasury. The meeting, loaded with expectations in the markets, will be a test to assess whether this change of course manages to consolidate international confidence and decrease in the country riskwhile the Central Bank reserves remain under pressure in an electoral year. Thus, the government has executed A change in your policy with the agency and marketsshowing disposition to align with the IMF directives.
In recent days, Milei has allowed The official exchange rate exceeds $ 1,300breaking a new brand – in the immediate – with a more pronounced landslide, a decision that reflects an adjustment towards a more competitive dollar, in tune with the expectations of the multilateral organism. This movement, interpreted as a response to the demand for foreign exchange -a critical report of the IMF in the previous one-, contrasts with the initial strict control positionsuggesting a pragmatic strategy to avoid additional exchange tensions before the October legislative elections.
However, compliance with reservations remains a short -term resistance point. The Executive has implicitly recognized the difficulty of achieving the established objectives, opening negotiations to adjust accumulation goals, especially for Septemberwhere projected levels of US $ 9,000 million seem unattainable. At the same time, and in what is a strange turn by the Palace of Finance, the Treasury began to add dollars above the US $ 1 billion, in the intention of starting to “do homework” with the agency, showing political will in exchange for greater deadlines and lower amounts in the reserves goal. This detour, combined with the economic flying, indicates that Milei prioritizes pre -election stability over the strict adherence to the demands of the IMF, betting that US $ 2,000 million acts as a financial support while redefining the reservation strategy.
Upload the IMF’s request and the market
A pillar of this turn has been the increase in the reference rate of interest in tenders, which climb at a record level of 65% annualreflecting the urgency of the treasure for capturing funds. In the last tender, approximately $ 9 billion were placed in letters and bonds, covering only 76% of the more than $ 11 billion in maturities, leaving a liquidity surplus –calculated at US $1 billion– That could press the dollar. This high rate seeks contain the expectations of devaluation and sustain the “Carry Trade”aligning with the directives of the IMF, although the financial cost for the State has shot, marking a drastic change in monetary policy.
At the same time, according to the Government, the Treasury has initiated a purchase of reservations, a movement that complements the expected disbursement of the IMF and seeks to strengthen the external position of the country. This decision, which implies the intervention in the currency market to acquire dollars, represents a turn with respect to the initial position of not issuing pesos to buy currencies, suggesting that Milei seeks to accumulate a liquidity mattress in the face of the vulnerability of the reserves.
In the Casa Rosada they think that the US $ 2,000 million, pending approval, They will be a key support to sustain this strategysending a sign of trust to investors in a context of growing uncertainty. The flexibility of the exchange rate has generated an immediate impact, with the official dollar approaching the upper limit of the flotation band that today exceeds $ 1,400.
Dollars
Avoid the “Pass Through”, the challenge
In the government they think that this adjustment could lead to inflationary pressures if it is not properly controlled. The increase in the annual 65% rate, implemented in the most recent tender, seeks to mitigate these expectationsalthough the partial placement of debt indicates that the market continues to demand more attractive conditions, a challenge that Milei’s flying tries to address with the support of the IMF. The annual 65% rate rise in the recent tender, which renewed $ 9 billion of a total of $ 11 billion in maturities, leaves a balance of $ 2 billion without absorbing, an indication of the caution of investors outside the new lace requirements. This measure, aligned with the IMF expectations of reducing inflation, has allowed to capture short -term funds, but the high cost for the treasure could limit its sustainability.
The government seems to trust that the disbursement of US $ 2,000 million will compensate for these tensions, although The effectiveness will depend on the coordination between the purchase of reserves and the management of liquidity. The modification of reserves goals reflects recognition of structural limitations to accumulate currencies, with the Central Bank, opting for a non -intervention strategy that has allowed the exchange rate to adjust. The purchase of reservations by the Treasury, a new element in this flying, suggests an intention to mitigate this weakness, although the lack of a clear plan for September generates skepticism. This flexible approach, backed by the increase in the annual 65% rate, indicates a willingness to yield in reservations to ensure IMF disbursement.
Source: Ambito
