The Minister of Economy, Luis Caputo, and the president of the Central Bank announced that The national Treasury will absorb the debt that the monetary authority has with the banks in the form of remunerated liabilities.
The decision, presented as “phase two” of the monetary program of the Javier Milei governmentpoint to “close the second tap of the monetary issue”, which both officials consider responsible for inflation. And he would aim to create the conditions to lift the exchange rate, at some point that they did not specify.
In practice, This means that the debt generated by the remunerated liabilities of the BCRA, those that are issued in the very short term to absorb the surplus of pesos, will become the responsibility of the Treasury, even though it will continue to be managed by the monetary body.Since the treasury will not be able to issue debt to meet this demand, the alternative will be to generate a fiscal surplus to pay it, in the midst of a recession that affects resources, or to issue some debt instrument from financial institutions.
Although Bausili said that this transfer scheme will begin to be discussed with the banks starting Monday, he did announce that he will implement a Monetary Regulation Letter, which will pay a coupon, which in turn will become the new monetary policy rate. In this regard, the head of the Central Bank was convinced that the interest rate will tend to be positive with the new measures, which will have a new monetary squeeze in their co-consequences.
Caputo admitted that the Treasury will have to “redouble” its fiscal effort to manage this new debt, which would mean a greater adjustment than the one made in the first six months of his administration. For the Minister of Economy, the closing of this “tap” will create the conditions to get out of the exchange rate trap “without a deadline and at the moment when there is no risk” of a run.
The minister and the president of the Central Bank, who are partners in the same consulting firm, arrived at the press conference at the end of a day in which the exchange tension did not ease despite the sanction of the Bases law and the fiscal package that it promoted. the national government.
>> Read more: Caputo assured that “there is no devaluation project” and did not give details about the exit from the stocks
The movement of the parallel dollar and bonds in recent weeks gave rise to growing concern regarding the continuity of the crawling peg, the system of microdevaluations that allowed, along with other things, to generate a moment of stability between March and April.
The recent recommendation of the International Monetary Fund regarding the need to speed up the exit from the stocks and accelerate the devaluation added concerns, as well as the difficulty in accumulating reserves (in June it lost reserves) and the wall of debt maturities in dollars that is coming in the following days.
In this framework, city economists began to warn that Caputo’s program was exhausted and that a new stage would come. Some speculated that a scheme for exiting the stocks, with devaluation, was going to be announced at the press conference. It did not happen, which seems to indicate that Caputo resists internal pressure for it to happen. It is not clear how the markets will respond to this announcement on Friday night, after a day of great tension.
