Although it has registered net purchases of foreign currency in the Single and Free Exchange Market (MULC) for US$17,165 million, The effective accumulation of reserves was only US$6.362 billionaccording to a report by Quantum Finance.
The difference of almost US$11 billion is mainly due to the financial commitments that the Milei administration has had to face. Among the most relevant factors, the following stand out:
- Net payments on loans to international organizations amounted to 3,294 million.
- The maturities of national and provincial public sector debt securities amounting to 4,528 million.
- The cancellation of a loan from the BCRA with the Bank for International Settlements in Basel, which amounted to 3 billion.
These payments were necessary to meet the country’s financial obligations. but they have hindered the BCRA’s ability to increase its reserves to the extent that would be desirable for the Government.
Situation that underlines the tension between the need to maintain international solvency and the accumulation of strategic reserves to maintain monetary and exchange rate policy.
“In general, we have a mistaken idea that the Central Bank is an appendage of the treasury, which is why all payments abroad are seen as negative.”said the economist Aldo Abram.
In this regard, I emphasize that the confusion is such that they gave him “non-transferable bills that were worthless” to take the dollars and send them abroad, which worsened the Central Bank’s assets: “If an asset is withdrawn but a liability is cancelled, which are the pesos, for the same value, everything is fine.”
But the Argentine context is not like that of other countries, said Abram, who referred to the role of the exchange controls. “It gets a little complicated when one has an exchange control and a large exchange gap,” to which he added, “as long as the Central Bank charges the Treasury in pesos, necessary to sell those currencies and pay abroad, the truth is that this is what happens in any normal country in the world.”
However, from a strictly numerical point of view, Debt payments have slowed the accumulation of reserves. This could be interpreted as something negative, but it is by fulfilling these financial obligations that the country maintains its international credibility, something positive and essential to achieving long-term economic stability.
Source: Ambito
