The process of demonetization of the economy deepens. Interest and the purchase of reserves continue to explain the monetary issue.
For the first time since April 2023, last February the Central Bank (BCRA) validated a nominal drop in the Monetary base. It was then the first month so far of the new government in which the BCRA was clearly contractive by more than $382,000 million, further accentuating the demonetization of the economy.
Before delving into what the main contractionary factors were last February, we must see which were the taps through which emissions continued. First of all, it was the payment of interest on paid debt of the BCRA for more than $2,246 billion, followed by the net purchases of foreign currency from the private sector that implied a Base expansion of more than $1,968 billion, while the other factor was the cancellation of Passive Passes from the banks for another $1,829 billion. So this triad of factors grew the Base in February by more than $6 billion.
How did the BCRA manage to absorb such an injection of liquidity? He did it through the Treasury, or rather, together. On the one hand, net sales of foreign currency to the Treasury implied an absorption of almost $850,000 million. In addition, the Treasury increased, through various operations, its deposits in the BCRA by more than $3,625 billion. Then, the BCRA-Treasury tandem, through operations, exchanges, placements and other tricks, aspired to another $1,952 billion. That is, between foreign currency sales, the impact of puts sold to banks (safeguard for the repurchase of public securities in case of emergency), the placement of the Bonus for importers (Bopreal) and the placement of the LEDIV (a type of exchange insurance for banks), and other interventions by the BCRA More than $6.4 billion were aspired.
It could be estimated that the Treasury was contractionary, without counting the monetary effect of net foreign currency purchases, at more than $3.6 trillion between bond repurchases from the BCRA plus other operations. While the Bopreales involved an absorption of almost $4 billion, among the puts and other interventions and the LEDIV there was an expansion of more than $2 billion. Added to this is the result of the External Sector, which contributed an expansion of almost $1.2 trillion and the rest corresponds to the flushing of remunerated monetary liabilities that, between sterilization, interest and variation in the stock of these BCRA liabilities, injected more than $4.5 trillion approximately.
The expansion of the Base accumulates almost $1 billion so far this year
The balance of the year accumulates an expansion of the Base of almost $1 billion. This implies a nominal increase of 9%, which compared to the inflationary records of the first two months show the sharp fall in real terms of the amount of money, which is also transmitted to the monetary aggregates (M2 and M3) that have fallen in real terms at historic low levels.
For example, according to estimates from the Broda Study, the transactional private M2 aggregate has fallen to 4.7% of GDP when it was 7.7% pre-pandemic, while the M3 aggregate has fallen to 10% of GDP and was 13.3% at the beginning of 2020. Both aggregates managed to recover, through the pandemic, to levels of 14.2% and 21.8% respectively in May 2020. From then on, they have been plummeting, hand in hand with the acceleration of the process inflationary. To have a reference, the average of the last two decades shows an M2 of 10.7% and an M3 of 16.8%. So there is room to recover, that is, to issue as long as the demand for money continues, and there is a stabilization plan.
Source: Ambito
