While the Government cuts funds to the provinces, BCRA supports debt placement of Chaco and Santa Fe: the details

Through Communication “A” 8040/2024 of the Central Bank (BCRA), published this Wednesday in the Official Gazette, addressed to financial entities, the organization reported that it will not raise objections to the modification of the interest rate applicable to the issuance of Treasury Bills at a fixed rate by the Province of Chaco within the framework of the “Treasury Bill Issuance Program of the Province of Chaco” for the year 2024.

The modification of the interest rate has been authorized by the BCRA through Communications “A” 7938 and “A” 7975, and is in line with the conditions established by the Ministry of Finance of the Ministry of Economy of the Nation.

The BCRA also reminds the financial entities involved that they must observe the provisions regarding credit risk fractionation provided for in the aforementioned regulations.

Debt province of Santa Fe

Likewise, through Communication A” 8041/2024 the BCRA authorized financial entities to acquire Public Securities issued by the Municipality of Rosario, Province of Santa Fe, for a total amount of up to $5,775,000,000.

Standard details

• Program: The Public Titles will be issued within the framework of the Financing Program for Pavement at the Final Level and Related Infrastructure.
• Exercise: The issuance will take place during fiscal year 2024.
• Amount: The maximum amount of the issue is $5,775,000,000.
• Conditions: The conditions of the issue are established in Note NO-2024-54397918-APNSH#MEC of the Ministry of Finance of the Ministry of Economy of the Nation.

Requirements for financial institutions

• Acquiring financial entities must comply with the provisions on credit risk fractionation provided for in the regulations on “Financing to the non-financial public sector.”
• As the Public Titles do not have the implementation of the transfer of the guarantee, the acquiring financial entities must also comply with the applicable provisions established in the regulations on “Minimum capital of financial entities” and “Financing to the non-financial public sector”

Context

During May the Government continued with the task of cutting funds from the governorswith the aim of maintaining and l fiscal surplus. According to data from consulting firms, based on official information, The group of 23 provinces and the City of Buenos Aires received 83% less money than what they received in the same month last year.

This is indicated in a report by the consulting firm Politikon Chaco, in which it is pointed out that in the so-called non-automatic transfers from last month expenses of $59.7 billion were accrued, but $71,331 million were paid.Apparently, the debate taking place in the Senate regarding the Bases law and the Fiscal Package had no impact whatsoever on the decision to maintain the cuts. The data would indicate that the government Javier Milei would not have “opened his wallet” to obtain a favorable opinion.

It is worth remembering that in the opposite direction, last month the Income Tax recorded a real growth in collection of 80% compared to last year, which meant that the provinces received extra funds of 1.7 billion through federal co-participation.

The report indicates that in the accrual stage, That is, at the time the payment obligation is generated, non-automatic transfers fell 87.6%while in the stage paid fell 83.3% compared to May 2023.

“In May the same phenomenon was seen again as in the month of April: the transfers paid were higher than those earned. The paid/earned ratio was 119.5% and generated a reduction in the debt of the national State with the whole of subnational jurisdictions at $11,631 million, although it still accumulates $120,524 million owed for accrued and unpaid commitments,” warns Politikon Chaco.