At the beginning are the BCRA reserves. Since January, the entity that Pesce leads has been forced to part with a good amount of dollars. It is estimated, more than US$1.6 billion since the beginning of 2023. The reasons are known: the early liquidation of the soybean dollar left little remnant and a drop in wheat sales due to the drought did its thing. These restrictive elements that we mention here deepened a belief of the economic team: that the agreement with the IMF must be respected to the letter. At least make the effort.
The modification of the reserve goal by the agency was a relief for Minister Massa. With the months, the Tigrense trusts more and more in the route that Georgieva marks for him because there he finds something that is not abundant in the domestic financial scenario: certainty. If he complies, the dollars arrive. But, in addition, the stubbornness does not save a paradox: all the recommendations of the IMF are, in the margin, inflationary. Higher inflation pushes the government to comply with the IMF, and complying with the IMF additionally generates more inflation. Less subsidies, rate hikes, an exchange rate without intervention, and positive interest rates in real terms are part of a tool required by the IMF that drives up domestic prices.
In other words, as the IMF approves the quarterly reviews, it is likely that inflation will slowly consolidate its floors.
The task of the economic team is not easy. There are numerous variables that must be monitored, so many, that the pre-established plan is finally resorted to: lowering the fiscal deficit, issuing fewer pesos in the BCRA’s assistance to the Treasury, managing dollars and controlling the amount of pesos circulating through the system, even that which is the product of the debt of the Treasury and the BCRA. It is a question of removing, at least in part, the monetary factor from the complex structure of multi-causal variables that drives inflation.