They warn that a delay in the agreement with the IMF could leave the Central Bank with negative reserves in March

The BCRA assures that the swap with China is part of the entity’s liquid assets. EFE / Fabián Mattiazzi

Central Bank reserves could experience in the coming months pressure greater than the current one by expected payments to the International Monetary Fund, an eventual additional demand for dollars at the official price for imports and the need for greater official interventions to avoid a jump in the exchange rate.

According to private estimates, the Central Bank’s foreign exchange buffer could be negative in net terms if the swap with China is not taken into account as part of the assets held by the monetary authority, a common form of measurement in the private sector.

A report by the consulting firm Analytica tried to estimate the amount of reserves that the Central Bank currently has and how many it could have by March, the month in which the Government considered having finished the negotiation with the Monetary Fund to avoid continue with principal payments to that body.

According to private estimates, the Central Bank’s foreign exchange buffer could be negative in net terms if the swap with China is not taken into account

According to this study, which dissected the different components of gross reserves, it considered that “reserve requirements in dollars are excluded since they are the counterpart of deposits in commercial banks. In turn, the line of credit with the BIS is not considered because it has repayment terms of less than one year. Regarding the special drawing rights of the IMF, they are not a currency, and their conversion is not automatic, which takes away liquidity ”.

A central difference when analyzing the level of net reserves is whether or not part of the currency swap with China is booked. “In most of the available analyzes, particularly in financial markets, swaps with the Bank of the People’s Republic of China are not computed as net reserves. Under that criterion, today they would reach USD 4,423 million”The report mentioned.

The monetary authority assures that the swap with China is part of the BCRA's net reserves
The monetary authority assures that the swap with China is part of the BCRA’s net reserves

“We consider that that portion of the swap pending execution should be included in them. Although the Central Bank does not provide such information, from the analysis of its publications we infer that a maximum balance equivalent to 25% of the total would remain, about USD 5,074 million over USD 20,297 million. Under this assumption, today net reserves would be USD 9,497 million”, Considered the consulting firm presided over by Ricardo Delgado.

In a similar vein, the vice president of the Central Bank Jorge Carrera He recently opined on his Twitter account that this component of the reserves should be taken into account when making the calculation. “Some analysts have installed the concept of liquid reserves. They are wrongly assembled by discounting various items, some very arbitrarily. For example, they discount Special Drawing Rights (SDR) which are liquid reserves. Which are usable as SDRs or as another currency for all types of payments“, started.

“They also discount swaps like the one with the People’s Bank of China, without taking into account that it is usable. Since last year there is even the possibility of making import payments in yuan saving the change to dollars“, said.

For the vice president of the Central Bank Jorge Herrera, liquid reserves must take into consideration the swap with China and the Special Drawing Rights of the IMF

According to the simulation carried out by Analytica, in this sense, “with the most widespread methodology net reserves in March will reach a negative value of USD 2,140 million”. Otherwise, if part of the currency exchange with China is taken into account, the sum of net reserves would be USD 2,934 million.

To understand this process in the coming months, it is necessary to analyze what factors would influence this marked decrease in the reserve buffer. For Juan Ignacio Paolicchi, economist at the consulting firm Empiria, “the key point is whether or not we pay the IMF in December. If this is the case, the BCRA would lose 1 billion of reserves in November and 1 billion in December in a net way ”, he mentioned to Infobae.

“Our estimates show that on the one hand, about USD 70 million per day would be lost in the Single Free Exchange Market (MULC) and in the cash market with settlement another 30 million. Assuming that this moderates a bit after the elections but sales are maintained to stop the exchange gap and in the spot market because supply is lower than demand in the official dollar, it should be that rate of decline, “he said.

Source: Analytica
Source: Analytica

On the other hand, he pointed out that “the positive part is that in December there is a sale of wheat”. “But with a high gap there will be a lot of demand for imports. If the Central Bank also accelerates the rate of devaluation, there are incentives so that exporters do not liquidate everything they could liquidate and importers demand all possible dollars, financing themselves with credits in pesos ”, he concluded.

In this sense, for Analytica, “The relevant question for the coming months is how the critical components of net reserves will evolve: payments to multilateral credit organizations and the result of operations in the foreign exchange market.”

“In the first case, we discount that Argentina will reach an agreement with the IMF that avoids the payment of USD 2,873 million of capital maturities in March 2022. Until then, the maturities will be canceled mainly with the SDRs.. Consequently, exclusively due to payments to agencies, net reserves will fall by USD 3,579 million until March”He continued.

The question of demand and supply of currencies is also not minor for Analytica. In that sense, he estimates that there would be a demand for dollars in the foreign exchange market of USD 2,984 million. That way, the impact on reserves of the payment to international organizations and the supply of demand would exceed USD 6,500 million.


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