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In the red: Pesce leaves the Central Bank with negative net reserves of US$ 12,000 million

2023-12-07T09:36:54.113Z

Highlights: The Central Bank faced a foreign exchange hemorrhage of US$ 23,400 million in 2023. The sale of dollars, the payment of debts and the intervention in the market led to the management of the Frente de Todos closing with negative net reserves. The official exchange rate – overdue – is at $60 and the blue at $65. The government has been postponing the delivery of foreign currency to importers. This led to a debt of US $ 57,000 million that the private sector owes to its suppliers.


In 2023, reserves were lost by US$ 23,400 million. What will happen in 2024.


Throughout 2023, the Central Bank faced a foreign exchange hemorrhage of US$ 23,400 million. The sale of dollars, the payment of debts and the intervention in the market to control the financial dollars led to the management of the Frente de Todos closing with gross reserves of US$ 21,100 million and negative net reserves of US$ 12,000 million.

The slide of the loss of Central reserves during the presidency of Miguel Pesce deepened last year. When he took office in 2019, gross reserves reached $25 billion, net reserves were positive at $000 billion, the official dollar was trading at $13 and the informal dollar was selling at $000. Today the official exchange rate – overdue – is at $60 and the blue at $65.

Gross reserves consist mostly of bank reserve requirements from dollar deposits, gold, SDRs (the currency of the Monetary Fund) and yuan from the swap with China. The net are the Central Bank's own dollars. There are no official numbers on net reserves, which represent the firepower to intervene in the market and control the exchange rate.

For Aurum Valores, the stock of net reserves is close to -US$ 12,000 million, "which will force a significant accumulation effort in the coming months to stabilize the macro. In pursuit of that goal, a high real exchange rate would be necessary. Dealing with the risk of pass-through to prices of this adjustment should be at the forefront of the next economy minister's concern."

In this context of net reserves in the red, the government has been postponing the delivery of foreign currency to importers. This led to a debt of US$ 57,000 million that the private sector owes to its suppliers, its parent companies or its creditors.

What's Next

"The higher debt commitments with both the IMF and private creditors (due to the step up of the restructured bonds) and the purchase of securities against BCRA reserves to moderate parallel quotations were covered by greater restrictions on import payments and a significant increase in debt with suppliers, which rose to US$ 36,900 million by the middle of the year," says the consulting firm LCG.

LCG details that for the remainder of the year, payments to the IMF of US$ 900 million and a disbursement of US$ 3,300 million remain.

For next year, the forecast is that more dollars will come in from exports. "With the end of the drought and the start-up of the N. Kirchner gas pipeline, we estimate a commercial result of more than US$ 20,000 million by 2024. This will take the pressure off the reserves."

However, not all of these currencies will end up in the BCRA's coffers." Debt commitments will be accentuated again next year, both those agreed with the IMF (even if the disbursement program initially agreed, US$ 3,500 million net payments) and those linked to the restructured bonds that are already beginning to be amortized (US$ 5,000 million) will be accentuated," says LCG.

It will also be necessary to pay off the growing debt with importers. "In this regard, the exchange rate policy implemented by the new government will be fundamental: the sincerity of the exchange rate and the relaxation of certain controls will become decisive for the accumulation of reserves," they detail.

Source: clarin

All business articles on 2023-12-07

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