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Luis Caputo announced a plan to move towards zero emissions, will maintain exchange rate policy and again rejected a devaluation

Luis Caputo announced a plan to move towards zero emissions, will maintain exchange rate policy and again rejected a devaluation
Luis Caputo announced a plan to move towards zero emissions, will maintain exchange rate policy and again rejected a devaluation

In substance, The total elimination of the BCRA’s paid liabilities will be sought, which will pass to the Treasury, making the Government’s fiscal commitment more demanding.. The head of the Treasury Palace stated that These measures “will have a positive impact on people because they reinforce disinflation.”

Caputo began his presentation by stating that the Government received “the worst inheritance in history”, with a deficit of 5 points in the Treasury and 10 in the Central Bank. But he said that “the crisis could have been avoided” and I add “We received a patient in intensive care and today we are recovering.”

The minister considered that under these conditions “a shock program was required and that is what we did.” He recalled that “we were in fiscal balance from day one, something unprecedented” and stressed that “The fiscal deficit was always at the heart of the problem” Argentine economy. In this regard, he highlighted the “enormous conviction of the President” to carry out this policy, but also taking into account the situation of the most vulnerable sectors.

Second tap

After these first measures, Caputo said that now they are entering a second stage which “consists substantially of closing the second emission tap” (after having closed the first, that is, the fiscal deficit).

In this instance, the aim is to attack the issue for the interest that the Central Bank pays for remunerated liabilities because “We want to give greater certainty and solidity to the economic program so that there is no more anxiety about when the restrictions will be lifted,” the minister said.

In this regard, he clarified that “we are not falling in love with the stocks, what we are falling in love with is the macroeconomic order.” He specified that The lifting of the cepo is a third stage for which “we do not set a date but parameters”. And he reiterated that Controls will be lifted “when we are as sure as possible that it will not cause any surprises to people”such as a possible rise in the dollar.

Caputo leaving the stocks.mp4

Bausili explained that it is important to close the issue generated by monetary liabilities since the Central Bank’s balance sheet is being cleaned up, which is being achieved both by increasing foreign currency reserves (on the asset side) and by reducing the interest rate and now by removing remunerated liabilities.

The head of the entity specified that when the change of Government occurred, the interest on the remunerated liabilities was demanded every month an issue equivalent to 40% of the monetary base and that the issuance caused by this route doubled that generated by the Treasury deficit.

Double commitment

The decision that has been made is that These liabilities are transferred to the Treasurywhich constitutes, as Caputo pointed out, “a sincerity” of the situation, since they had their origin in the imbalance of the Treasury accounts.

He stressed that by passing on greater debt to the Treasury, it “it is doubly committed” and will require “very responsible” management.

The downside, Bausili explained, is that “a very important autonomy is restored to the Central Bank” since it will be able to “set the (interest) rate without compromising its balance sheet”with which he considered that the entity will have more tools to focus on its mission, which “is to eradicate inflation.”

In this sense, he anticipated that meetings between the BCRA authorities and the banks will begin next Monday to implement the measures and different regulations will be known.

One of the important issues in this regard is the dismantling of the puts (options to put bank securities to the monetary authority) that if executed would generate an emission of 4 points of GDP.

Bausili said that work is being done with the entities on the issue to return full management of monetary policy to the BCRA, without depending on a third party for the creation of money, as happens with puts. The official preferred not to give details since he is in talks with the entities, but he said that “We are very confident that we will find solutions.”

In response to a question from AmbitBausili stated that Basically what there is going to be is a sterilization mechanism similar to the repos, with a monetary regulation bill that will be administered by the Central Bank but that will correspond to the TreasuryThe head of the monetary entity reported that meetings with financial institutions will begin on Monday and that acceptance of the Letter is “voluntary.”

Without changes

Caputo emphasized that with these measures there is “a deepening of what we have been doing, in a truly robust program of zero deficit and zero emissions”. And he anticipated that by setting the amount of pesos “reduces exchange rate volatility” as well as contributing to the fall in inflation.

The minister insisted that “There is no change and there will be no change in the exchange rate policy”. That is to say, ratified the 2% monthly devaluation and the scheme of 80% settlement of exports at the official exchange rate and 20% in the financial markets.

He insisted that “it makes no sense to devalue” and that improvement in competitiveness must be achieved through lower taxes. In this regard, he confirmed the reduction of the Country Tax that would occur as the funds derived from the fiscal package are received, in August or September.

Source: Ambito

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