The minister considered that in these conditions a “shock program was required and that is what we did.” He recalled that “we went to fiscal balance from day one, something unprecedented” and stressed that “the fiscal deficit was always 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 that “consists substantially of closing the second emission tap” (after the first one has been closed, 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 longer any anxiety about when the stocks will be released,” the minister said.
In this regard, he clarified that “we are not falling in love with the cepo, what we are falling in love with is the macroeconomic order.” He specified that The exit from the stocks is a third stage for which “we do not set a date but parameters”. And he reiterated that The controls will be released “when we are as sure as possible that it will not cause any shock to people”as could be 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 interests of the remunerated liabilities 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 pass 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 highlighted that, by transferring greater debt to the Treasury, it “it is doubly committed” and will require “very responsible” management.
The counterpart, explained Bausili, is that “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 regard, he said that next Monday meetings will begin between the authorities of the BCRA and the banks to implement the measures and that different regulations will be made known.
One of the important issues in this sense is the dismantling of puts (options to sell bank securities to the monetary authority) that if executed would generate an emission of 4 points of GDP.
Bausili pointed out that work is being done with the entities on the issue to return to the BCRA full management of monetary policy, 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 maintained that “We are very confident that we will find solutions.”
When asked about AmbitBausili stated that Basically, there will be a sterilization mechanism similar to the passes, with a monetary regulation letter that will be administered by the Central Bank but that will correspond to the Treasury.. The head of the monetary entity reported that meetings with financial entities will begin this 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 zero deficit and zero emission program”. 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 “there is no point in devaluing” 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 enter, in August or September.
