In an unexpected turn in the administration of the dollarthe Secretary of Finance, Pablo Quirno, announced on Tuesday that the National Treasury will intervene in the free market to guarantee its liquidity and normal functioning.
This measure, which adds to a previous intervention carried out – secretly – last week, represents A drastic change regarding the scheme agreed with the International Monetary Fund (IMF)which limited the sales of official dollars to the ceiling of the exchange band. The objective -Vox Popul- is to contain the upward pressure on the dollar in the period prior to the October elections, in a context of growing uncertainty and volatility in the markets.
Historically, The commitment to the IMF established that the interventions in the change market would be restricted to extreme situationsspecifically when the official exchange rate will reach The upper limit of the established bandinitially set between $ 1,000 and $ 1,400 and adjusted daily. This restriction was part of a broader agreement, backed by a loan of US $ 20,000 million, destined to preserve international reserves and promote macroeconomic stability, avoiding discretionary interventions that could distort the free game of supply and demand.
However, the recent climb of the dollar, which on Monday reached $ 1,385 – its highest nominal level versus a value for the ceiling of $ 1,467 – has led the government to prioritize the containment of inflation. The central aspect of this authorization lies in the condition imposed by the IMF: The official intervention in the change market will only be allowed if “surplus resources” are used fiscal.
According to sources close to the Treasury Palace, the Fund endorsed this measure after consultations with the Government, ensuring that dollars sales do not compromise the net reserves of the Central Bank nor generate additional pressures on public indebtedness. “The Monetary Fund seemed great,” said Federico Furiase, director of the BCRA last night, and stressed that the operations will be financed exclusively with budget surpluses, avoiding monetary emissions or loans that can destabilize the adjustment program.
Treasury Fire Power: Market question
Although the government announced for July a primary fiscal surplus of $ 1.74 billion (with a growth of 41% year -on -year) and a small financial deficit of $ 168,515 million, considering the interests of the debt that are usually capitalized – like those of LECAPS and other instruments – the financial deficit is much larger. According to calculations based on official data, the capitalizable interests in July amounted to $ 19 billionequivalent to almost five times the payment of retirement estimated at $ 4.6 billion for that month, which significantly increases the gross debt stock and questions the sustainability of the surplus announced in the medium term.
The IMF condition To intervene is not less. Implies strict control over the origin of the funds usedlimiting government flexibility to respond to unforeseen exchange shocks. Although the fiscal surplus has been a pillar of the current economic model, its sustainability depends on variables such as economic growth, tax collection and public spending control. Any deviation could expose the treasure to criticism for breach, potentially activating reviews of the agreement with the IMF and affecting the confidence of international investors, something that in fact, has been registered in the last hours. Falls of up to 3% in the sovereign bonds and the consequent impulse of the Risk Country Road at the 950 basic points realize it.
What does the government plan to do with the dollar bands
But there is more. Despite the active intervention of the Treasury, The Government maintains its position that the exchange band regime continues in force No alterations. According to Furiase, the sales of dollars from the treasure are specific and temporary, motivated by the pre -election tension in the markets, and They do not imply a change in the established flotation scheme. The economic team official emphasized that these operations do not use BCRA reserves or IMF funds, but seek to provide liquidity to mitigate political noise, while reaffirming that the bands continue to operate as a regulatory framework.
However, the market had already detected movements last week, with estimates by consulting firm 1816 that suggested Sales of US $ 300 million by the Treasury in the last two weeks, initially justified as operations for provinces with debt maturities. This Tuesday, the treasure intervened againachieving a temporary containment of the dollar, although doubts persist about the ability to sustain these operations in time without compromising fiscal resources. This insistence on the continuity of the band system raises a debate on the nature of the intervention.
Source: Ambito
