The challenge of remumding without reviving ghosts of the past: Can the economy grow without inflation?

The Government launched a session to inject liquidity in the economy, with the aim of sustaining a solid annual growth rate of 6% while trying to maintain the inflation under control. The plan is based on innovative mechanisms to increase the circulation of pesos and dollars without resorting to monetary issuance. With a recapitalized central bank, a commitment to fiscal discipline and a vision of “endogenous dollarization.”

A low monetization dilemma

The Argentine economy suffers extremely low monetization, with a monetary base equivalent to only 5% of GDP, half of the 10% observed in stable times. Decades of macroeconomic instability have led citizens to reject weight, accumulating dollars under mattress and eroding the necessary liquidity to boost growth. As inflation slows down and interest rates fall, the demand for weights and credit is rebounding, creating a bottleneck that the Government seeks to address through remumination.

“The economy grows at 6% year -on -year, but it works with limited reserves,” said Federico Furiase, director of the BCRA and member of the economic team, in a recent presentation. “Reconetization is fuel for sustained growth, but it must be done without rekindling inflation.”

Reconetization in pesos (according to the government): a virtuous circle

Unlike past policies that depended on printing money to cover deficits, the government uses two main channels to inject pesos:

• Treasury debt reduction: Every two weeks, the treasure performs debt auctions. By renewing less than 100% of the debt it overcome, pays banks in pesos, releasing liquidity. These funds are channeled towards loans to the private sector, doubling credit to households and companies from 4% to 8% of GDP. This change invests a tendency of decades in which the State monopolized credit, forcing banks to prioritize public debt. “Banks finally act as banks,” said Furiase, underlining the increase in loans.
• Purchases of dollars by the Central Bank: In the new exchange regime, the weight floats between a $ 1,000 floor and a $ 1,400 ceiling against the dollar (with an adjustment rate of 1% monthly). When the exchange rate reaches the floor, the Central Bank would buy dollars, injecting pesos in circulation.

On these points we must mark that to face the reduction of treasure debt, the BCRA accounting profits, which implies an emission of pesos to attend the treasure, had to resort to the turn of accounting profits. In addition, purchases of dollars on the floor of the flotation band do not necessarily reflect a genuine demand for pesos, since exporters are obliged to sell currencies by current regulations

Dollars in the system: endogenous dollarization

Argentina is also addressing the shortage of dollars encouraging the incorporation of about US $200,000 million in private non -banked savings to the formal economy. The strategy, known as “endogenous dollarization”, seeks to integrate these dollars without coercive measures. Key initiatives include:

• Loads in liberalized dollars: Banks can now issue bonds called dollars and lend funds for mortgages or business projects, even borrowers without dollars. This avoids restrictions on loans with dollar deposits, reducing risks associated with short -term withdrawals.
• Popular market money: Although the details remain confidential because they are strategic information, the Government is designing a “popular bleaching” to encourage citizens to deposit dollars in the banking system. This initiative, part of a “coin competition” framework, seeks to make the use of dollars more efficient, boost growth and increase tax collection, paving the way for future tax reductions.

On the laundering we must mention that one has just finished one where last year could be entered up to US $ 100,000 million with immediate availability and $ 0 cost. It was a success, but that money was not overturned to the real economy.

A revitalized central bank

A fundamental pillar of the plan is the recapitalization of the Central Bank. For years, the treasure exhausted the bank’s dollars in dollars, replacing them with “non -transferable letters” without market value. This eroded trust and fed inflation. Recently, the Government used $ 12,000 million of an IMF loan of $ 20,000 million to repurry these letters, canceling debt with the Central Bank and restoring reservations in dollars.

However, the country risk remains around 700 points, which suggests that the markets seek an recomposition of reservations with their own dollars, not with loans.

Macroeconomic discipline as a base

The remumding plan is based on a tax rigor base:

• Zero deficit: A constant fiscal surplus – level higher than expenses – the need to print money, anchoring inflation expectations.
• Commercial Opening: Gradual commercial liberalization encourages competition, pressing companies to avoid unjustified price increases or lose market share.
• Debt refinancing: The Treasury has assured dollars for the bond payments of July 2025, reducing the pressure on the reserves. The medium -term objective is to access capital markets to renew debt in dollars, a step towards the financial standardization of Argentina.

Risks and challenges

The plan is not exempt from obstacles. Decades of economic volatility have rooted a reflection in companies and consumers to associate dollar movements with inflation.

The Argentina’s remuneization strategy is a high -risk effort to break its inflationary past. By injecting weights carefully through the reduction of debt and purchases of dollars, and encouraging the entry of dollars to the system through liberalized loans and amnesties, the government seeks to sustain growth while preserving stability. With a recapitized central bank and an unwavering fiscal discipline, the plan marks a departure from populist errors. However, Success depends on convincing a skeptical audience to rely on weight and government again.

Financial Analyst