The Central Bank accentuated in recent years its role as lender of last resort of the National Treasury for cover the large deficit administration in public finances. As a counterpart, the entity’s balance sheet accumulates month after month a liability of such a large magnitude that it is equivalent to 12% of GDP. It happens that after transferring pesos to the Government, the Central Bank reabsorbs that liquidity through the debt securities it issues: Leliq (Liquidity Bills), Passive Passes and Nobac (BCRA Notes).
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The stock of remunerated liabilities -to absorb excess pesos-, that is to say that they are indexed by the monetary policy rate, today of 75% annual nominal or 107% effective rate, exceeded 10 trillion in December of pesos.
The remunerated liabilities of the BCRA represent some USD 58,343.5 million at the official exchange rate
This mountain of weights is not inflationary at presentby being retained within the financial system -it is the backing of savers’ time deposits- but it is a potential threat in case the market is released, because today it represents more than two Monetary Bases -the money with which the economy works-, now at 4.8 trillion pesos.
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Until the penultimate month of the year, the accumulated fiscal red was almost 1.8% of GDP. There was a sharp cut in the items of energy subsidies
Analysts consulted by infobae They agree that the ability of the private sector to lend pesos to the Government may be reaching a limit and they see the Central Bank weakened by its role as a lender through Treasury debt repurchases and sterilization via Leliq.
As reported by the BCRA, on December 15, it had a debt stock of about $7,894,130 million for Leliq; plus $2,109,919 million for passive Passes and about $53,790 million in Nobac. In total, there are $10,057,840 million, which grew by 120% in the interannual comparison, mainly due to interest payments, equivalent to some USD 58,343.5 million at the official exchange rate.
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Added to this is another charge for the BCRA, the monetary issue to redeem debt in pesos due to the departure of private agents who do not want to go to the elections with these titles in their portfolio.
When observing the stock of Leliq and Passes when Alberto Fernández assumed the presidency, on December 10, 2019, they accounted for $1,092,660 million ($1.1 trillion), which at an official exchange rate of $59.96 represented USD 18,223.1 millions. In other words, in three years, this BCRA debt grew by the equivalent of USD 40.1 billion.
In addition, the Central Bank buys Treasury bonds in pesos that are unloaded by private companies to prevent their price from sinking and the rate of new placements escalating. Between June and July, intervention in the secondary debt market was close to $1.4 trillion, while according to estimates by the consultancy facimex, from mid-October to today reached another 717,000 million pesos. Are USD 12.160 million – at the official exchange rate – of financing to the Treasury at the hands of the BCRA for the bond bailout in pesos in 2022.
Meanwhile, the primary deficit of the Government accumulated an amount comparable to that of the remunerated liabilities of the BCRA, where, in short, all the excess of pesos ends to cover that red of the public accounts.
In 2020, a fateful year due to the scope of the COVID-19 pandemic, the National Public Sector closed the year with a primary deficit -prior to debt payment- accumulated in twelve months of $1,749,957 million, equivalent to USD 20,797 million , at an official exchange rate of $84,145 at the end of that year.
Monetary imbalances caused by the fiscal deficit end up increasing the BCRA’s liabilities
In 2021, the primary deficit reported by the Ministry of Economy reached $1,407,641 million or some USD 13,700 million at an official exchange rate of $102.75 at the end of last year.
Meanwhile, with data up to last November, 2022 comes with a primary deficit accumulated in eleven reported months of $1,453,012.6 million, which at an official dollar of $157,235 a month ago added the equivalent of USD 9,241 million.
Thus, the accumulated primary fiscal deficit in almost three years of Alberto Fernández’s management is equivalent to about USD 43,737 milliona figure barely higher than the USD 40,120 million of growth in remunerated liabilities in the balance sheet of the Central.
And if you take the financial fiscal deficit of the national public sector -which includes debt payments, discounted the extraordinary income corresponding to the SDRs (Special Drawing Rights) contributed by the IMF- the red accumulated by the national administration scales to USD 63,371 million in three years, compared to some USD 70,500 million issued by the BCRA for debt and interest (Leliq, Passive Repos and Nobac) -for USD 58,343 million at the official exchange rate- plus the purchase of Treasury bonds in pesos (USD 12,160 million).
“The entire monetary imbalance generates an endogenous issue of 12% of the Monetary Base per month. However, the Leliq are in the banks and behind the banks are the fixed terms that they cannot be dollarized because there are ‘stocks’. The imbalance can continue to accumulate without generating an exchange rate shock and the Government can manage the situation without going to an implosion,” he said. Federico Furiasedirector of Anker Latin America.
The Leliq are in the banks and behind the banks are the fixed terms, which cannot be dollarized because there are stocks (Furiase)
The experts of Invecq Economic Consultant pointed out that “the ‘broad’ Monetary Base -includes the remunerated liabilities of the BCRA- as of November ran 6.4% real behind inflation, 80% annual versus 92.4% of the CPI”, although they warned that “certainly this dynamic could be aggravated by the soybean dollar, where we estimate in our base scenario that it will imply an expansion of 10% to 12% of the Monetary Base in November, possibly liquidity that will be sterilized and translates into a higher quasi-fiscal cost”.
In the same way, Jorge Vasconcelos, director of the IERAL of the Mediterranean Foundation, specified that “monetary policy is no longer expansive as it was until the middle of the year; interest rates, from strongly negative in the first semester, have gone to a level close to neutrality; while fiscal policy has been moderated, with the use of public spending that evolves below the inflation rate in the interannual measurement. It can be said that it is a reasonable agenda to avoid a spiraling of inflation”.
The endogenous interest issue of Leliq increases the BCRA debt at a faster rate than inflation
However, a report from GMA Capital He contributed that “after the favorable CPI data, the Central Bank announced that for the moment it will keep the interest rate unchanged. While this will help to further contain inflation and especially the financial dollar, it should be watched carefully. pay special attention to the dynamics of remunerated liabilities and interest that generates, since now these earn interest faster than the rate of inflation”.
“No matter what the source, the promise of more pesos in the economy is a guarantee that inflation will have no reason to give us new downward surprises. In this context, despite the election year, it is essential that fiscal and monetary prudence take precedence in the future”, they stated from GMA Capital.