Monetary overview
In December, with the assumption of the new authorities, a “ non-disruptive monetary regime change ” was launched, a title used by the Central Bank of the Argentine Republic (BCRA) itself on December 12, 2023, in order to correct the existing imbalances.
The monetary authority focused on working on endogenous issuance instruments, that is, instruments that form part of the BCRA's liabilities and that accrue interest.
First, on December 18, 2023, LELIQs were transformed into passive “passes” with a one-day term, subsequently on July 22, 2024, the suspension of passive pass operations was ordered and the “Liquidity Tax Bill” (LeFi) was established as the main liquidity management instrument of the banking system.
The report accompanying this note provides a summary of the most important monetary variables. It is presented in different thematic axes: international reserves, the assets and liabilities of the Central Bank of the Argentine Republic (BCRA), reference interest rates and the exchange rate.
Situation as of August 31, 2024
Regarding the objective of strengthening international reserves, this has not yet been achieved, largely due to the real undervaluation of the exchange rate. While reserves have increased compared to when the current government took office, their magnitude is lower than projected.
The pre-set devaluation rate of 2% per month, known as the crawling peg, compared to inflation, causes the exchange rate to appreciate in real terms.
Regarding the situation of the BCRA's assets and liabilities, the report shows how the composition of both evolves in order to achieve the cleanup of the entity, an objective that is being achieved.
To achieve these objectives, various measures were taken:
- In December 2023, the official exchange rate went from 365 to 800 pesos per dollar.
- The change that occurs in May 2024 is the result of an adjustment in the valuation criteria, at the amortization cost of the Non-Transferable Treasury Notes
- On June 22, the BCRA ordered the suspension of the operation of passive repurchase agreements, eliminating endogenous issuance, replaced by the “Liquidity Fiscal Letter” (Letra Fiscal de Liquidez) (LeFi), issued by the treasury.
- The BCRA proposed as an objective to limit the amount of pesos to the amount of the Broad Monetary Base (the sum of remunerated liabilities in pesos and monetary base) as of April 30, 2024, that is, $47,7 trillion current pesos (9,1% of GDP).
Structure of the BCRA's Assets. From 31-8-2023 to 31-08-2024
Structure of the BCRA's liabilities. Comparison between 31-08-2023 and 31-08-2024
Finally , the report shows the level of the various reference rates, inflation, the evolution of the official exchange rate (in addition to other exchange rates) with its future expectation and the multilateral real exchange rate index.
